Tunisia seeks way between unrest and uncertainy

Sunday 5 Jun 2011

Nearly five months after a popular uprising swept president Zine El Abidine Ben Ali from power in the first days of the 'Arab Spring,' Tunisia looks to rebuild an economy mired in political uncertainty

Tunisia, used to posting at least five percent annual growth, faces stagnation this year as the authorities try to meet rising aspirations, hold elections and limit the fallout from unrest in neighbour Libya.

Unemployment, which ultimately drove the unrest against the old regime, could reach 20 per cent of the workforce this year, up from 13 per cent in 2010, the government admits.

"The revolution is making existing problems even worse in dramatic fashion at a difficult time," said Tunisian economist Mohamed Ben Ramdhane. "Instability is hurting tourism and investors don't like unstable conditions."

Since Tunisia's popular revolt sparked the region-wide Arab Spring, the country has regained relative calm but tensions remain -- there are strikes, fear of Al-Qaeda and of the Libyan crisis on its borders bringing thousands of refugees.

On the political front, a transitional government is still in place but is in pains to meet electoral deadlines and hand over power.

The longer the uncertainty remains, the slower the return of tourists, who supported some 400,000 jobs in a sector accounting for nearly seven percent of gross domestic product.

With official numbers forecasting a 41 per cent drop in tourists and a 48 per cent drop in revenues, the 2011 tourist season will be sluggish, despite advertising campaigns celebrating a "new Tunisia".

Foreign investors are skittish. Direct foreign investment, a key driver for job growth, crashed 25 per cent over the first four months of the year compared to the same period in 2010, according to the Tunisian foreign investment agency.

"The political classes are involved in Byzantine discussions on election dates while ignoring the fundamental problems," said labour expert Abdeljalil Bedoui, deploring the lack of a clear political and economic message.

Widespread opinion agrees that the real priorities are the same ones as the Ben Ali era -- reducing regional inequality and kick-starting job creation, especially for the 80,000 university graduates who hit the job market every year.

Some analysts say there are positive signs despite the problems.

Exports -- electrical goods, agriculture, textiles -- increased 11 per cent in the first quarter of 2011 and the harvest outlook seems promising.

"Inflation is under control and public debt isn't going beyond 45 per cent (of GDP)," said expert Bedoui.

The international community meanwhile has promised $40 billion (27.6 billion euros) to support democratic change in the Arab world.

"But aid risks putting our country deeper into debt," cautioned Bedoui. "Our partners have to sustain the revolution by foregoing repayment on some of that debt."

For economist Mohamed Ben Ramdhane, a massive investment program sustained by international loans is key.
An economic rebound he says can only occur by financing infrastructure, helping small businesses and by giving direct aid to regions too often forgotten in the past.

Short link: