Friday, Aug 03, 2012


 
   By By Leila Hatoum

DUBAI (Zawya Dow Jones)--Tunisia's economic growth is expected to accelerate to 2.7% this year from a 1.8% contraction in 2011, and to 3.5% in 2013 as the country's economic activity picks up, the International Monetary Fund said Friday.

The IMF, however, warned of a possible spillover from the euro-zone crisis, and risks from the unsettled political situation and the weak global environment.

In its latest Article IV review of Tunisia's economy, the IMF attributed the growth to a pickup in tourism and foreign direct investments, as real gross domestic product, or GDP, increased by 4.8% in the first quarter in 2012 compared to the same period of 2011.

"However, risks to the short-term outlook are large and tilted to the downside, including a worse-than-anticipated recession in Europe which would depress exports, an escalation of domestic social tensions which would hamper foreign and domestic investment, and capacity constraints and delays in financing which could curb the envisaged growth-supporting fiscal stimulus," the IMF added.

The IMF's 2012 forecast remains lower than the North African state's own target of a 3.5% GDP growth for this year, and the international body's 2013 expectations are below Tunisia's forecast for next year as well.

The Tunisian government said Thursday it was targeting 4.5% GDP growth in 2013, up from the 3.5% forecast for this year, by revitalizing consumption, stimulating investment and boosting exports.

Tunisia experienced a severe recession in 2011 amid domestic and regional turmoil and saw a sharp decline in tourism and foreign direct inflows, said the IMF.

Despite a still fragile economy that is vulnerable to outside risks, particularly a spillover from Europe's crisis, and a rise in unemployment, the IMF kept a positive outlook for the medium term in Tunisia.

"Real growth would gradually reach 6 percent by 2017 in a baseline scenario which assumes continued macroeconomic stability, improvement in governance and the business environment, reforms of the labor market and education system to address the labor skills mismatches, and a strengthening of the financial sector," it said.

To achieve higher economic growth, Tunisia should adopt a comprehensive package of structural reforms, including tax reforms, a tighter monetary policy, and address social issues such as rising unemployment, said the IMF.

Vulnerabilities within the banking sector also need to be addressed, especially non-performing loans and bank recapitalization issues, it added.

-By Leila Hatoum, Dow Jones Newswires; +971-4-446-1686; leila.hatoum@dowjones.com; Twitter: @ZDJnews

(END) Dow Jones Newswires

03-08-12 1710GMT