Tunisia

Growth supported by tourism but held back by inflation and unemployment

After stagnating in 2023, the economy grew by 1.4% in 2024. This recovery was particularly marked at the end of the year, thanks to the strong rebound in the agricultural sector (+12% in the fourth quarter of 2024), boosted by olive growing, after a 60% drop in 2023 due to a severe drought.

In 2025, growth should accelerate slightly. The agricultural sector (10% of GDP in 2024) will grow modestly, with durably uncertain prospects owing to irregular rainfall and the persistent risk of drought, tempered by the commissioning of desalination plants. Conversely, services (70% of GDP) will grow faster, driven by tourism and related activities (accommodation, catering, communication and transportation). The country is set to welcome a potentially record number of over 11 million tourists in 2025. However, the sector is vulnerable to a contraction in European markets and regional competition. These same factors affect the manufacturing industry (16% of GDP), particularly the automotive and aeronautical parts industry, as well as the textile and clothing industry, which face increasing competition from rivals such as China and Turkey. The food industry is expected to continue to perform well, despite concerns about olive oil exports to the US amid the tariff war. The extractive industries (hydrocarbons and phosphates) are penalised by a tense social context marked by strikes and production stoppages, as well as by resource depletion due to lack of investment.

Persistent inflation, driven by monetary financing of the deficit and the compression of imports due to the lack of foreign currency, added to the weakness of the dinar, will force the central bank to maintain a restrictive monetary policy – the key rate stood at 7.5% in March 2025. A slight decline in inflation is nevertheless expected in 2025. The situation will continue to weigh on private consumption (despite the strength of remittance inflows) which is further hampered by high unemployment and the planned increase in income tax rates for the wealthiest sector of the population. National private investment will remain weak, affected by political and social instability, limited access to financing – the state diverts a significant share of credit – and the increase in corporate tax. Public investment, meanwhile, will be restricted by a critical budgetary situation, with revenues being absorbed by debt servicing and costly subsidies. The authorities will seek to attract FDI through public-private partnerships in the transport, water, waste management and energy sectors. In March 2025, Tunisia took an important step in its energy transition with the signing of four agreements with foreign companies for solar photovoltaic projects totaling 500 megawatts, for a total investment of 1.2 billion dinars (nearly USD 400 million).

Precarious public and external accounts in the absence of IMF support

The public deficit should narrow again slightly in 2025. The budget plans to increase tax revenues, in particular by raising income and corporate tax rates. These measures, which are expected to weigh on household purchasing power, have drawn strong criticism from civil society. Although the budget provides for a rationalisation of expenditure with a wage freeze and a restrictive recruitment policy in the civil service, public spending will remain heavy. There has been no adjustment to costly subsidies (on food and energy). Recognising the government's limited capacity to obtain external financing in the absence of an IMF programme, the authorities will continue to turn to local banks, including the central bank (BCT). The latter is authorised to grant facilities to the public treasury of up to 7 billion dinars (USD 2.3 billion), repayable over 15 years interest-free, with a 3-year grace period. Public debt (54% of which was domestic in 2024 after 47% in 2023) could exceed 90% of GDP in 2025 and the risk of default will remain high, while on average USD 3.3 billion in annual repayments are due on medium and long-term debt in 2025-26.

In 2025, the current account deficit will widen due to the worsening trade deficit. However, in a context of sluggish domestic demand and in order to raise the foreign currency needed to service external debt, imports will remain under control. At the same time, goods exports will be weak. Conversely, the services surplus should improve, driven by the expected strong performance of tourism. Remittances from expatriates, another valuable source of foreign currency, which reached 1.07 billion dinars in 2024 (+7.2% compared to 2023), will maintain their pace. Faced with the persistent weakness of foreign investment and the difficulty in accessing international financing, the current deficit will be periodically financed by foreign exchange reserves, which are already low. In February 2025, these reserves amounted to USD 7.2 billion, which is equivalent to 3.4 months of imports. They could fall below the three-month coverage threshold during 2025.

Presidential authoritarian drift and refusal of reforms recommended by the IMF

In 2022, a new constitution adopted by referendum established a strong presidential regime, weakening legislative power and establishing presidential control over the government, the security forces and the judiciary. Despite the low level of support from the population, illustrated by its low turnout at the polls (11% in the legislative elections at the end of 2023 and 28.8% in the presidential elections), Kaïs Saïed was re-elected president in October 2024 with 90.7% of the vote in an election marked by the opposition repression. Presidential authoritarianism, the sidelining of political parties and civil society, constant changes in the administration, and the lack of success in economic policy are fuelling social discontent. The country has seen a recent upsurge in demonstrations and union actions, but this does not seem to challenge the exercise of power in the short term.

In 2023, Kaïs Saïed rejected the IMF's proposed programme (USD 1.9 billion), which included subsidy reductions and public enterprise reform, due to the social cost, which he deemed too high. However, Western partners continue to provide limited support to mitigate migratory pressure, ensure adequate food supply, and finance infrastructure projects, among others. The EU provides one-off funding under the Memorandum of Understanding for a Strategic and Comprehensive Partnership concluded in July 2023. Other bilateral partners (Saudi Arabia, France, Italy, etc.) are doing the same, and Algeria is a major supplier of natural gas. On the multilateral side, the World Bank continues to finance projects, as evidenced by the USD 100 million granted in February 2025 to strengthen higher education and boost employability. Other institutions, such as the International Islamic Trade Finance Corporation (ITFC) and the African Export-Import Bank (Afreximbank) also play a crucial role in supporting Tunisia. However, there will be no large-scale budget support without the assurance of an IMF programme.

Last updated:April 2025