|IMF's MD Christine Lagarde (right) with Tunisia's prime minister Habib Essid in Tunis in September|
It has been a torrid time for Tunisia’s tourism industry since the Bardo Museum murders in Tunis and the subsequent attacks which left 38 holidaymakers dead on a beach in Sousse this year.
Tourism earnings account for some 7% of GDP in Tunisia, and economic growth is now expected to slide to 0.5% in real terms, contrasting with forecasts which had been pointing to 3% growth or more for this year.
Strikes and other protests by unemployed workers in the phosphate sector have weakened the economy, too, undermining exports.
GDP increased by 2.3% in 2014, but Tunisia’s country risk score has remained depressed since the Arab Spring uprising – in fact 5.7 points lower in Euromoney’s country risk survey compared with 2010.
Languishing in the fourth of five tiered categories into which all 186 sovereigns are divided, Tunisia is a medium-to-high risk borrower synonymous with a B- to BB+ (sub-investment) credit rating.
Fitch and Moody’s concur with Tunisia on the lowest notch of their double-B ratings.
Bank Audi head of research Marwan Barakat, citing Fitch when it recently affirmed Tunisia’s BB- credit rating as stable, notes the rating is supported by “structural features such as development and governance indicators”.
The importance of the successful democratic transition spurring elections and a new constitution cannot be ignored in that respect.
ECR experts, while recognising the problems Tunisia is presently facing, are optimistic over its prospects.
It is one of the top-10 countries showing the most improvement to its risk score in Euromoney’s survey since August:
It means the sovereign has climbed to 77th out of 186 countries surveyed, leapfrogging similarly rated Sri Lanka.
With its investor risk subsiding, the possibility of an investment grade in the next few years is not an outlandish prospect.
There is a long way to go, of course.
Tourism for one thing might take a while to recover, not least since recent terrorism warnings indicate Islamist activity is still a latent danger.
However, Egypt has seen similar bombings and yet the holiday market there has swiftly revived, suggesting Tunisia's tourism sector will see a similar rebound.
Besides, the economy is already benefiting from the phosphate-industry problems having been resolved. Phosphate production was 37% lower in the first eight months of this year compared with the year-earlier figure, but has recovered to more normal levels in the past few months.
The fiscal deficit is taking longer to tackle, but is likely to make more headway next year, narrowing from the 5% of GDP level estimated for 2015.
The IMF recently urged the government to accelerate the reforms process, but noted they had picked up in the banking sector recently.
Commenting on the IMF’s review, Byblos Bank’s chief economist Nassib Ghobril states: “[The IMF] said the foreign currency reserves are at an adequate level of four months of import coverage, which is necessary to strengthen external buffers and reduce vulnerabilities.”
Encouragingly, Ghobril adds: “The Fund projected inflationary pressures to remain contained, supported by lower energy and food process, and a prudent monetary policy.”
The risks are still high, and setbacks can occur, but on the evidence to date, and with the political will not lacking, Tunisia is one to watch in 2016.
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