TUNIS- Tunisia's economy could shrink by up to 7% this year because of the effects of the COVID-19 pandemic, the investment minister said on Wednesday.

The government ended all restrictions on movement and businesses this month and will open its sea, land and air borders on June 27. However, the pandemic is hammering the tourism sector, which contributes nearly 10% of gross domestic product and is a key source of foreign currency.

The number of unemployed people in Tunisia will increase by 275,000, according a government study in partnership with the United Nations, investment minister Slim Azzabi said.

This would raise the unemployment rate to 21.1% in 2020, up from about 15% at the start of the year.

The study expects the economy to shrink by 4.4%, but Azzabi said the figure could rise as high as 6% or 7%.

Tourism revenue in the first five months of this year fell by about 50% from the same period of 2019 as western tourists deserted Tunisia's hotels and resorts.

(Reporting by Tarek Amara Editing by Jon Boyle and David Goodman) ((tarek.amara@thomsonreuters.com;))