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TUNISIA ECONOMICMONITOR
Middle East and North Africa Region
Navigating Out of the Crisis
Spring 2021
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Tunisia Economic Monitor
Navigating Out of the Crisis
Middle East and North Africa Region
Spring 2021
© 2021 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org
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iii
TABLE OF CONTENTS
Abbreviations and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii
Addendum to the Tunisia Economic Monitor – Spring 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Résumé Exécutif . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
الملخص التنفيذي . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv
1. Recent Economic Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Growth and Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
The Socioeconomic Impact of COVID-19 on Household Welfare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
The External Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Fiscal Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Monetary Policy and Inflation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
2. Outlook and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Special Focus: Assessment of the Digital Transition in Tunisia. . . . . . . . . . . . . . . . . . . . . . . . . . .19Why Digitization? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Tunisia’s Digital Strengths. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Tunisia’s Missed Opportunities and Areas of Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Recommendations to Accelerate the Digital Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
List of FiguresFigure 1 Impact of COVID-19 Was Higher than Neighboring Peers… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Figure 2 …while Policy Stringency Was More Relaxed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Figure 3 Nearly All Sectors Contracted in 2020…. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Figure 4 …with Sharper Declines than Regional Peers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISISiv
Figure 5 International Flights Recovered Only Temporarily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Figure 6 Energy and Mining Sectors Still Far Below Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Figure 7 Household Reported Worsening in Living Standards… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Figure 8 …Particularly among the Lowest Income Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Figure 9 Varying Reasons for the Decline in Business Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Figure 10 The Deterioration of Welfare Felt among Everyone. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Figure 11 Net Exports Shrinks, Moderating the Trade Deficit... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Figure 12 ...Mainly Caused by Savings on Energy Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Figure 13 Current Account Deficit Still Wider than Peers... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Figure 14 …yet Borrowing Still Largest Source of Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Figure 15 A Narrow Current Account Appreciates the Dinar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Figure 16 Less Pressure on CA Boosts FX Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Figure 17 Fiscal Deficit Balloons Public Debt to Record Levels… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Figure 18 …while Subsidies Continue to put Pressure on Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Figure 19 Despite Rising Concern, Public Wage Bill Grows…. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Figure 20 …with Interior and Defense Shares Doubling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Figure 21 Lower Inflation Provides Space for Rate Cuts…. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Figure 22 …yet Most Credit is Soaked Up by the Public Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Figure 23 Output Will Not Recover Before 2024… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Figure 24 …due to the Sharper Contraction in 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Figure 25 Maturity of the Pillars of the Digital Economy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
List of BoxesBox 1 Building a Green, Resilient, and Inclusive Agro-Food Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Box 2 How Did COVID-19 Affect Regional Growth? Monitoring Economic Activity
Using Night-Time Lights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
v
AMG2 Assistance Médicale à tarif réduit
CBT Banque Centrale de Tunisie (Central Bank
of Tunisia)
EFF Extended Fund Facility
GDP Gross Domestic Product
GIPAC Groupement Interprofessionel des Produit
Avicoles et Cunicoles
GIVLAIT Groupement Interprofessionel des Viandes
rouges et du Lait
IFAD International Fund for Agricultural
Development
IMF International Monetary Fund
INS Institut National des Statistaiques
IRESA Institut de la Recherche et de
l’Enseignement Supérieur Agricoles
ISP Internet Service Provider
LMICs Low- and Middle-Income Countries
M3 Broad Money
MNO Mobile Network Operators
MVNO Mobile Virtual Network Operator
NPL(s) Non-performing loan(s)
OIT Tunisian Order of Engineers
ONAGRI Observatoire National de l’Agriculture
ONH Office National de l’Huile
PNAFN Programme national d’aide aux familles
nécessiteuses
Q-o-Q Quarter over Quarter
RFI Rapid Financing Instrument
SOE(s) State-owned Enterprise(s)
STEM Science, Technology, Engineering, and
Math
STIR Société Tunisienne Des Industries de
Raffinage
US$ United States Dollars
ABBREVIATIONS AND ACRONYMS
vii
T he Tunisia Economic Monitor (TEM) presents
timely and concise assessments of current
economic trends in Tunisia in light of the
country’s broader development challenges. Each
edition includes a section on recent economic
developments and a discussion of the economic
outlook, followed by a special focus section drawing on
recent World Bank analytics on Tunisia. The report is
intended for a wide audience, including policy makers,
business leaders, financial market participants, and
the community of analysts and professionals engaged
in Tunisia. The Tunisia Economic Monitor is a product
of the Middle East and North Africa (MENA) unit in the
Macroeconomics, Trade & Investment (MTI) Global
Practice in the World Bank Group.
The report was prepared by Ali Ibrahim
Almelhem (ET Consultant, MTI), Mohamed Habib
Zitouna (ST Consultant, MTI) and Shireen Mahdi
(Senior Economist, MTI). The team included Olivier
Durand (Senior Agriculture Economist, SMNAG), Eric
Raoul Philippe Dunand (Senior Digital Development
Specialist, IDD02), Carlo Maria Rossotto (Digital
Development Senior Specialist, BM), Sadok Ayari
(External Affairs Associate, ECRMN), and Federica
Alfani (ET Consultant, EMNPV). Helpful comments
were received from Denizhan Duran (Young
Professional, HMNHN), Yosra Bouaziz (ET Consultant,
SMNAG), and Mehdi Barouni (Senior Economist,
HMNSP).
It was prepared under the direction of Jesko
Hentschel (Country Director, MNC01), Eric Le Borgne
(Practice Manager, MTI) and Tony Verheijen (Country
Manager, MNTCN). The team is grateful to Muna Salim
(Senior Program Assistant, MTI) and Olfa Limam
(Program Assistant, MNCTN) for their administrative
support.
The findings, interpretations, and conclusions
expressed in this Monitor are those of World Bank
staff and do not necessarily reflect the views of the
Executive Board of the World Bank or the governments
they represent.
For information about the World Bank and its
activities in Tunisia, please visit www.worldbank. org/
en/country/Tunisia (English) or www.albankaldawli.
org/ar/country/tunisia (Arabic).
For questions and comments on the content of
this publication, please contact Ali Ibrahim Almelhem
([email protected]), Massimiliano Cali (mcali@
worldbank.org) or Eric Le Borgne (eleborgne@worldbank.
org).
The cutoff date for this edition of the TEM was
June 1st, 2021.
ACKNOWLEDGEMENTS
viii
ADDENDUM TO THE TUNISIA ECONOMIC MONITOR – SPRING 2021This issue of the TEM covers political and economic
developments until June 2021. As such it does not
include the decision, and its potential impact, of
the Tunisian President Kais Saied to dismiss the
Prime Minister Hichem Mechichi on July 25th. This
emergency measure has been the prelude to a
number of other measures, including the dismissal
of the minister of defense and the minister of justice,
the suspension of parliamentary activities and the
removal of the immunity of members of Parliament.
President Saied also declared a curfew from July
26th through Friday August 27th, between 7p.m. and
6 a.m. At the time of writing the President has yet to
nominate the new Prime Minister.
These measures are likely to impact the
economy and the reform agenda as well. However,
it is too early for the TEM to identify such impacts,
which will be covered in the next issue of the TEM.
These will include the revised economic projections
and outlook, with the analysis in this report providing
a baseline prior to the emergency measures.
The reactions of the markets have been mixed.
Tunisian Government bonds have fallen substantially
on July 26th. The fall in bond prices is in line with the
market perception of higher short-term uncertainty on
public debt sustainability. Hard-currency bonds issued
by Tunisia’s central bank dropped by record amounts
on Monday, the 2027 and 2024 dollar-denominated
bonds both fell more than 5 cents to their lowest in
more than a year. Five-year credit default swaps for
Tunisia’s central bank reached 751 basis points, up
one point from Friday’s close. The level has almost
doubled from a year ago.
Countering this uncertainty is the perception
by the markets that these measures may help break
the long-standing political impasse on the policy
reform agenda and address the corrupt practices that
had grown to unprecedented levels in the last few
years. Consistent with this view, exchange rates and
the stock markets have fluctuated within the normal
bands in the week of July 26th.
Much of the outcome could depend on who will
be named as a Prime Minister, and how the President
will frame his actions and plans going forward.
ix
Recent Developments
Due to disruptions in international trade and
tourism triggered by the COVID-19 pandemic, the
Tunisian economy contracted by unprecedented
levels during 2020. Fortunately, recent data
indicates that the economy stabilized during the first
quarter of 2021, with quarter-over-quarter (q-o-q)
growth no longer in negative territory. In comparison
with regional peers, Tunisia experienced a sharper
contraction than others, having entered the crisis
while already experiencing slow growth, limited fiscal
space, and rising debt levels. While the government
managed the first phase of the pandemic well from
a health standpoint, this early success waned as
controls were relaxed later in 2020. A record 13.3
decline in the tradable services sector and a 11.7
percent drop in exports contributed towards the
8.8 percent economic contraction, as weak global
demand depressed industrial and tourism exports
throughout 2020. As a result, unemployment rose
from 14.9 to 17.4 percent, contributing to the wave
of protests breaking out around the country on the
10-year anniversary of the Arab Spring. Some of the
recent gains made in poverty reduction will be lost
because the share of the population vulnerable to
falling into poverty increased during 2020 due to the
impact of COVID-19 on the economy.
Despite this low growth environment, the
current account deficit has narrowed to 6.8
percent of GDP (from 8.5 percent a year before),
as a 34 percent drop in the trade deficit reduced
pressure on external balances. The reduction in
the trade deficit was led mainly by import demand
falling faster than exports, and higher energy savings
caused by lower commodity prices. The narrowing of
the current account helped reduce pressure on the
exchange rate and boost foreign exchange reserves,
which climbed from 112 at the end of 2019 to 158
days of import cover at the end of 2020.
Although the government has made recent
gains in balancing the budget, lower tax revenues
and higher health-related spending widened the
fiscal deficit to 10.4 percent of GDP. Losses in tax
revenue after the economic fallout of the pandemic
was the largest contributor to the widening deficit,
followed by an increasingly growing consumer
subsidy program and transfers to public employees
and state-owned enterprises (SOEs). Higher health-
related expenditures certainly contributed to the large
deficit, but will moderate going forward, as some of the
coronavirus-related stimulus will wane. To finance the
budget, the government quickly mobilized to secure
US$6 billion from external lenders, pushing public
debt levels to 88 percent of GDP. This led credit rating
agencies to downgrade the sovereign credit rating
of Tunisia, although the risk of debt default “remains
highly unlikely.”
A declining inflation rate provided much
needed space for looser monetary policy, as the
EXECUTIVE SUMMARY
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISISx
of the pandemic’s impact on the economy. The
financing of the public sector will be particularly
challenging in 2021, with an expected fiscal deficit of
8.6 percent of GDP, as the authorities deal with the
pandemic and maintain support to households, but
with depleted fiscal buffers. In particular, meeting
the 2021 budget’s external financing needs will be
challenging given the deterioration of the fiscal setting
and the recent sovereign credit rating downgrade.
Structural reforms are on the horizon but
will be difficult to implement in a fragile socio-
political environment. In April 2021, the Prime
Minister and the Minister of Economy, Finance and
Investment announced the government’s broad
economic reform priorities. The main elements were
transitioning from generalized subsidies to targeted
social assistance, controlling the public sector wage
bill, SOE governance reforms and restructuring,
modernization of monetary and financial policies,
digitization (see special focus section) and increasing
energy independence through investments in
renewable energy. Such reforms have been on the
agenda of every government since the revolution,
but have not been implemented because of a lack
of consensus between major stakeholders and an
unstable political and social environment. These issues
have grown in importance during the pandemic, as
the government has struggled to convince voters that
it has a viable plan to create jobs and restore growth.
A fragmented parliament has made policymaking
cumbersome, complicating the coronavirus response
and undermining the effectiveness of the government.
Central Bank of Tunisia (CBT) cut rates twice,
in March and September of 2020. The CBT also
played an active role outside of standard monetary
policy by enacting pro-active measures to support the
economy during the pandemic. Without the strong
fiscal and monetary response from the government
and the central bank, the impact of the crisis would
have been far more severe.
Outlook and Risks
Output is not projected to return to pre-pandemic
levels until 2024, due to pre-existing structural
weaknesses, a gradual global recovery, and a
slow path towards complete vaccination. The real
economy is projected to grow by 4 percent in 2021
before quick moderation back to historical growth
rates of 2.2–2.6 percent.1 The magnitude of the
recovery will depend on the evolution of the pandemic
in major trading countries and normalization of supply
chains, providing a revival in exports and services.
The current account deficit is expected to widen to 9.2 percent of GDP in 2021 as imports begin to recover and commodity prices rise. As the pandemic wanes and trade flows recover,
manufactured exports and tourism arrivals are
expected to pick-up gradually, supporting a gradual
reduction in the current account deficit to 8.9 percent
of GDP by 2023. But risks to the external outlook
remain high, including a sluggish recovery in exports,
given the heavy impact of the pandemic on firm
capacity and the pace of recovery amongst Tunisia’s
main trading partners
Financing needs are projected to remain
elevated in the medium term given the extent 1 World Bank April 2021 Forecast (Spring Meetings).
xi
RÉSUMÉ EXÉCUTIF
Derniers Développements
En 2020, l’économie tunisienne s’est contractée
à des niveaux sans précédents suite aux pertur-
bations que la pandémie de COVID-19 a causées
aux échanges internationaux et au tourisme. Fort
heureusement, les dernières évolutions indiquent
que l’économie s’est stabilisée au cours du premier
trimestre de 2021, la croissance en glissement
trimestriel n’étant plus négative. La Tunisie a connu
une contraction plus forte que celle enregistrée
par les autres pays pairs de la région, le pays ayant
affronté la crise alors qu’il pâtissait déjà des effets
d’une croissance lente, d’un espace budgétaire limité
et d’un endettement en hausse. Le gouvernement, qui
avait pourtant réussi à gérer la première phase de la
pandémie d’un point de vue sanitaire, a vu cet acquis
s’estomper à mesure que les contrôles commen-
çaient à se relâcher plus tard en 2020. La contraction
économique, estimée à 8,8 %, a essentiellement été
provoquée par une baisse record de 13,3 % enregis-
trée au niveau du secteur des services échangeables
et le repli de 11,7 % des exportations, le recul de la
demande mondiale ayant réduit les exportations
industrielles et touristiques tout au long de 2020. Par
conséquent, le taux de chômage est passé de 14,9 %
à 17,4 %, alimentant ainsi les vagues de protestations
qui ont éclaté un peu partout dans le pays à l’occa-
sion du dixième anniversaire du printemps arabe.
Il est attendu que les quelques progrès réalisés en
matière de réduction de la pauvreté soient, eux aussi,
perdus : en 2020, la part de la population susceptible
de tomber dans la pauvreté a augmenté en raison
des répercussions de la pandémie de COVID-19 sur
l’économie.
En dépit de ce contexte de faible croissance,
le déficit du compte courant s’est resserré pour
se situer à 6,8 % du PIB (contre 8,5 % une année
auparavant), au moment même où la diminution
du déficit commercial a allégé la pression exer-
cée sur la balance des paiements. La diminution
du déficit commercial s’explique essentiellement par
la rapidité de la diminution des importations compa-
rativement à celle des exportations. Le resserrement
du compte courant a permis d’alléger la pression
exercée sur le taux de change et aidé à renflouer les
réserves en devises qui sont passées de 112 jours
d’importation fin 2019 à 158 jours d’importations fin
2020.
En dépit des gains récemment réalisés en
matière d’équilibre budgétaire, la baisse des re-
cettes fiscales et l’augmentation des dépenses de
santé ont davantage creusé le déficit budgétaire,
le portant à 10,4 % du PIB. Le repli des recettes
fiscales des suites de l’impact économique causé par
la pandémie de COVID-19 a été le principal respon-
sable du creusement du déficit, suivi du programme
de subventions aux consommateurs et de transferts
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISISxii
aux entreprise publiques. L’augmentation des dé-
penses de santé a, elle aussi, contribué à l’ampleur
du déficit, même si l’on s’attend à ce qu’elle s’atténue
avec le temps, à mesure que la menace pandémique
s’estompe. Pour financer le budget, le gouvernement
s’est rapidement mobilisé pour obtenir 6 milliards de
dollars auprès de divers bailleurs extérieurs, ce qui a
porté le niveau de la dette publique à 88 % du PIB.
Cela a conduit les agences de notation à revoir à la
baisse la note de crédit souverain de la Tunisie, bien
que le risque de défaut de paiement “reste hautement
improbable”.
La baisse du taux d’inflation a permis de
dégager l’espace nécessaire à l’assouplissement
de la politique monétaire, la Banque Centrale de
Tunisie (BCT) ayant réduit ses taux à deux reprises,
d’abord en mars puis en septembre 2020. La
BCT a également joué un rôle actif en se démarquant
de sa politique monétaire conventionnelle et en
décrétant un paquet de mesures proactives visant à
soutenir l’économie pendant l’épisode pandémique.
Sans la forte réponse budgétaire et monétaire du
gouvernement et de la BCT, l’impact de la crise aurait
été bien plus grave.
Perspectives et Risques
Il n’est pas attendu que la production reprenne
ses niveaux pré-pandémiques avant 2024, en
raison de l’existence de faiblesses structurelles,
du caractère progressif de la reprise mondiale et
de la lenteur de la progression de la campagne de
vaccination. Il est prévu que l’économie réelle croisse
de 4 % en 2021, avant de revenir rapidement aux taux
de croissance habituels de 2,2 %–2,6 %. L’ampleur de
la reprise va dépendre de l’évolution de la pandémie
dans les principaux pays qui commercent avec la
Tunisie, ainsi que de la normalisation des chaînes
d’approvisionnement, relançant ainsi les exportations
et les services.
Le déficit de la balance des paiements est
voué à se creuser davantage pour atteindre 9,2%
du PIB en 2021, conséquemment à la reprise des
importations et à la hausse des prix des produits
de base. A mesure que la pandémie s’estompe et
que les flux commerciaux se rétablissent, on prévoit
que les exportations de produits manufacturés et les
arrivées de touristes reprennent progressivement,
induisant ainsi une réduction graduelle du déficit de
la balance des paiements à 8,9 % du PIB en 2023.
Toutefois, les risques qui pèsent sur les perspectives
extérieures restent élevés, notamment eu égard à la
lenteur de la reprise des exportations, compte tenu
du lourd impact de la pandémie sur les capacités
des entreprises et du rythme de la reprise chez les
principaux partenaires commerciaux de la Tunisie.
On s’attend également à ce que les besoins
en financement continuent de grimper sur le
moyen terme, au vu de l’ampleur de l’impact de
la pandémie sur l’économie. Pour 2021, on table
sur des finances publiques en difficulté et un déficit
budgétaire de l’ordre de 8,6 % du PIB. Dans le même
temps, les autorités continuent de lutter contre la
pandémie et de venir en aide aux ménages dans
le besoin, en dépit de l’épuisement des réserves
budgétaires du pays. Il sera particulièrement difficile
de répondre aux besoins de financement extérieur
du budget de l’année 2021, au vu de la détérioration
du cadre budgétaire et de la récente décote du crédit
souverain.
Les réformes structurelles sont difficiles
à mettre en œuvre au vu de la fragilité du
contexte socio-politique. En avril 2021, le chef
du gouvernement et le ministre de l’économie, des
finances et de l’investissement ont annoncé les
grandes priorités du gouvernement en matière de
réforme économique. Les principales composantes
de ces réformes ont porté sur : (i) l’abandon
des subventions universelles en faveur d’une
aide sociale ciblée, (ii) le contrôle de la masse
salariale du secteur public, (iii) la réforme et la
restructuration de la gouvernance des entreprises
publiques, (iv) la modernisation des politiques
monétaires et financières, (v) la numérisation (Se
référer à la section dédiée) et (vi) l’amélioration de
l’indépendance énergétique par l’intensification des
investissements dans les énergies renouvelables.
Ces réformes, inscrites à l’ordre du jour de tous les
gouvernements depuis la révolution, n’ont jamais
été mises en œuvre en raison de l’absence de
consensus entre les principales parties prenantes et
de l’instabilité de l’environnement politique et social.
RéSuMé ExéCuTiF xiii
Ces questions ont pris plus d’importance pendant la
pandémie et le gouvernement a des difficultés pour
convaincre les citoyens qu’il détenait un plan viable
pour créer des emplois et restaurer la croissance.
Le caractère fragmenté de l’ARP a entravé la mise
au point de politiques adéquates, compliqué la
réponse à la pandémie et sapé l’efficacité du travail
gouvernemental.
xv
التنفيذي الملخص
آخر التطورات
نتيجة للاضطرابات التي شهدتها التجارة الدولية و قطاع السياحة الناجمة عن جائحة الكوفيد19-، سجل الاقتصاد التونسي انكماشا بمستويات غير مسبوقة خلال عام 2020. و لحسن الحظ، تشير المعطيات الأخيرة إلى أن الاقتصاد يشهد استقرار خلال الثلاثي الأول من عام 2021، حيث تمكنت معدلات النمو من ثلاثي إلى آخر )q-o-q( من تجاوز المستويات السلبية. و بالمقارنة مع نظرائها في المنطقة، شهدت تونس انكماشًا أكثر حدة من غيرها من البلدان، حيث دخلت الأزمة بينما كانت تعاني أصلا من بطء في نسق النمو، ومحدودية الحيز المالي، وارتفاع مستويات الديون. و بينما تمكنت الحكومة من إدارة الموجة الأولى للجائحة بشكل جيد من وجهة نظر صحية، فقد تراجع هذا النجاح المبكر تزامنا مع تخفيف الإجراءات الاحترازية في وقت لاحق من عام 2020. وساهم التراجع القياسي المسجل وانخفاض 13.3٪ بنسبة التجاري للتداول القابلة الخدمات قطاع في أدى بنسبة ٪8.8، حيث اقتصادي انكماش بنسبة ٪11.7 في الصادرات الصناعية والسياحية طوال الصادرات العالمي إلى تراجع الطلب ضعف إلى 14.9٪ من البطالة معدلات ارتفعت لذلك، ونتيجة .2020 عام ٪17.4، مما ساهم في اندلاع موجة من الاحتجاجات في جميع أنحاء البلاد بمناسبة الذكرى العاشرة للربيع العربي. بالاضافة إلى ذاك ستخسر تونس بعض المكاسب الأخيرة التي تحققت في مجال الحد من الفقر لأن نسبة السكان المعرضين للوقوع في براثن الفقر ارتفعت خلال عام 2020 بسبب
تداعيات جائحة الكوفيد19-على الاقتصاد.
تقلص النمو، فقد معدلات بانخفاض تتسم التي البيئة هذه و رغم 8.5٪ )من المحلي الناتج إجمالي من 6.8٪ إلى الجاري الحساب عجز في العام السابق(، حيث أدى انخفاض العجز التجاري بنسبة ٪34 إلى العجز الانخفاض في كان و الخارجية. التوازنات على الضغط تخفيف بوتيرة الواردات الطلب على بانخفاض أساسي بشكل مدفوعًا التجاري انخفاض بسبب الطاقة تكاليف علي مدخرات الصادرات، من أسرع
الأسعار. وساعد تقلص عجز الحساب الجاري على تحفيف الضغط على
قفزت من 112 التي الصعبة العملة احتياطيات وتعزيز الصرف سعر
يومًا من التوريد في نهاية عام 2019 إلى 158 يومًا في نهاية عام 2020.
و على الرغم من أن الحكومة قد حققت مكاسب في الآونة الأخيرة على
وزيادة الضريبية الإيرادات انخفاض أن إلا الميزانية، توازنات مستوى
الإنفاق المرتبط بالقطاع الصحي أدى إلى توسيع عجز المالية العامة ليبلغ
10.4 في المائة من الناتج المحلي الإجمالي. و تعُتبر الخسائر في الإيرادات
اتساع في مساهم أكبر للجائحة الاقتصادية التداعيات بعد الضريبية
الذي يشهد زيادة مطردة، العجز، يليها كل من برنامج دعم المستهلك،
والتحويلات لفائدة الموظفين العموميين والشركات المملوكة للدولة. و من
المؤكد أن النفقات المرتفعة المرتبطة بالصحة قد ساهمت في اتساع العجز،
لكنها ستصبح معتدلة في المستقبل، حيث ستختفي بعض العوامل المرتبطة
بفيروس كورونا. و لتمويل الميزانية، قامت الحكومة بتعبئة الموارد بشكل
سريع لتأمين 6 مليار دولار من قبل المانحين الدوليين، مما رفع مستويات
أدى ذلك الإجمالي. وقد المحلي الناتج المائة من إلى 88 في العام الدين
السيادي الائتماني التصنيف بخفض الائتماني التصنيف وكالات قيام إلى
)الترقيم السيادي( لتونس، على الرغم من أن مخاطر التخلف عن سداد
الديون »لا تزال غير مرجحة إلى حد كبير«.
أجل من ضرورية مساحة توفير إلى التضخم نسبة انخفاض أدى و
بخفض التونسي المركزي البنك قام حيث مرونة، أكثر نقدية سياسة
البنك لعب .2020 عام من وسبتمبر مارس مرتين، في الفائدة أسعار
التقليدية النقدية السياسة خارج نشطاً دورًا أيضًا التونسي المركزي
لولا و الجائحة. أثناء الاقتصاد لدعم استباقية تدابير وضع خلال من
لكان المركزي، والبنك الحكومة من القوية والنقدية المالية الاستجابة
تأثير الأزمة أكثر حدة.
xvi TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISIS
الآفاق والمخاطر
ليس من المتوقع أن يعود الناتج إلى مستويات ما قبل الجائحة قبل حلول عام 2024، و يعود ذلك إلى نقاط الضعف الهيكلية الموجودة من قبل، و النسق التدريجي للانتعاش العالمي، و النسق البطيء لعملية التطعيم. من المتوقع أن ينمو الاقتصاد الحقيقي بنسبة 4 في المائة في عام 2021 قبل أن يتراجع بسرعة إلى معدلات النمو التقليدية البالغة 2.2 إلى 2.6 في المائة. و سيعتمد حجم الانتعاش على مدى تطور الجائحة في البلدان التجارية الكبرى و عودة سلاسل التوريد إلى وضعها الطبيعي، مما يوفر انتعاشًا في
الصادرات والخدمات.
إجمالي من 9.2٪ ليبلغ الجاري الحساب عجز يتسع أن المتوقع من وارتفاع الواردات انتعاش بدء مع تزامنا 2021 عام في المحلي الناتج أسعار السلع الأساسية. حيث أنه بانحسار الجائحة و انتعاش التدفقات التجارية، من المتوقع أن تنتعش الصادرات الصناعية و يرتفع عدد السياح الحساب التدريجي لعجز التخفيض الوافدين تدريجياً، مما يساعد على الجاري ليبلغ 8.9 في المائة من الناتج المحلي الإجمالي بحلول عام 2023. لكن المخاطر على التوقعات الخارجية لا تزال مرتفعة، بما في ذلك انتعاش بطيء في الصادرات، بالنظر إلى التأثير الكبير للجائحة على قدرات الشركات
ووتيرة التعافي لدى الشركاء التجاريين الرئيسيين لتونس.
المتوسط المدى على مرتفعة التمويل احتياجات تظل أن المتوقع من القطاع تمويل سيمثل و الاقتصاد. على الجائحة تأثير مدى إلى بالنظر
العمومي تحدياً خاصا في عام 2021، في ظل عجز مالي متوقع بنسبة 8.6 في المائة من إجمالي الناتج المحلي، حيث ستواصل السلطات التعاطي مع الوقائية. و على الاحتياطيات استنفاد مع ولكن الأسر، دعم و الجائحة وجه الخصوص، ستمثل تلبية احتياجات التمويل الخارجي لميزانية 2021 تحديا كبيرا نظراً لتدهور الوضع المالي وخفض التصنيف الائتماني السيادي
في الآونة الأخيرة.
تنفيذها الصعب من سيكون الهيكلية بالإصلاحات للقيام التخطيط رغم الحكومة رئيس أعلن ،2021 أبريل في هشة. وسياسية اجتماعية بيئة في العريضة لأولويات ووزير الاقتصاد والمالية و دعم الاستثمار عن الخطوط من الانتقال في: الرئيسية العناصر تمثلت و للحكومة. الاقتصادي الإصلاح الدعم الشامل إلى المساعدات الاجتماعية الموجهة، والتحكم في كتلة أجور العمومية وإعادة هيكلتها، الشركات العمومي وإصلاحات حوكمة القطاع وتحديث السياسات النقدية والمالية، والرقمنة )انظر قسم التركيز الخاص( المتجددة. الطاقات في الاستثمارات خلال من الطاقي الاستقلال دعم و كل برنامج في مضمنة دائما كانت الإصلاحات هذه أن هو الملاحظ و الحكومات المتعاقبة منذ الثورة، لكنها لم تنُفذ بسبب عدم التوصل إلى اتفاق بين الأطراف الفاعلة و بسبب عدم استقرار البيئة السياسية والاجتماعية. و ازدادت أهمية هذه القضايا خلال الجائحة، حيث بذلت الحكومة مجهودا للتطبيق ستساهم في خلق قابلة لديها خطة بأن الناخبين إقناع من أجل فرص العمل واستعادة معدلات النمو. و بالإضافة إلى ذلك، فقد جعل عدم يعقد مما مرهقة، السياسات صنع عملية جعلت البرلماني العمل فاعلية
الاستجابة لجائحة الكوفيد19- ويقوض فعالية العمل الحكومي.
1
1RECENT ECONOMIC DEVELOPMENTS
Growth and Employment
By mid-2021, the Tunisian economy began to
stabilize after a difficult year of managing the
pandemic. The impact of the pandemic has been
more strongly felt than in neighboring countries
and will require careful planning to pull the
economy out of the recession.
The road to Tunisia’s recovery is long.
The initial containment measures imposed during
March 2020 helped control the spread of the virus
and reduce pressure on hospital and medical staff.
As policy measures were relaxed over the Summer of
2020, new cases emerged (Figures 1 & 2). Managing
this second wave of the virus was complicated by the
political uncertainties created by the government’s
resignation in July 2020. In September, a new
government was formed with the daunting task of
managing increasingly difficult health, economic,
and social conditions. Containment measures were
imposed throughout the rest of 2020 including
curfews, restrictions on movement between regions,
FiGuRE 1 • impact of COViD-19 Was Higher than Neighboring Peers…
25,000COVID-19 new cases and deaths
10,000
20,000
5,000
15,000
0
800
200
600
400
700
100
500
300
0EgyptTunisia AlgeriaMorocco
Deaths (per million)Cases (per million)
Source: MENA Crisis Tracker, World Bank.
FiGuRE 2 • …while Policy Stringency Was More Relaxed
COVID-19 policy stringency index
Strin
genc
y in
dex
100
20
60
40
8070
90
10
50
30
0
Jan-
20
Feb-
20
Mar
-20
Apr-2
0
May
-20
Jun-
20
Jul-2
0
Aug-
20
Sep-
20
Oct-2
0
Nov-2
0
Dec-
20
Jan-
21
Feb-
21
Tunisia Algeria Morocco Egypt
Source: Johns Hopkins Coronavirus Resource Center.
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISIS2
alternating work in the public sector, and limiting
capacity in the hospitality sector. These policy
responses helped reduce pressure on a health
system with limited capacity and reduced the negative
repercussions on both lives and livelihoods. Despite
these measures, a third wave of cases began to rise
toward the end of the year, highlighting the difficulty of
managing the pandemic.
The real economy contracted by unprece-
dented levels in 2020 as Tunisia’s high exposure
to Europe weighed negatively on demand. The
Tunisian economy saw an unprecedented 8.8 per-
cent contraction for the entire year (Figure 3). The
majority of the decline was registered during the
second quarter (–21 percent y-o-y), during which
time that the pandemic’s effect on the economy
strengthened. Recent data shows that economic per-
formance is still affected by the pandemic, although
at a lower rate, with a 3 percent contraction y-o-y in
the first quarter of 2021. The pandemic has under-
lined Tunisia’s high exposure to economic conditions
in Europe in terms of trade, tourism, remittances, and
investment. Weak demand in Europe, the destina-
tion of more than 75 percent of Tunisian exports, will
continue to weigh on domestic growth and the pace
of recovery in the near term. In fact, Tunisia’s high
trade openness among MENA countries and heavy
emphasis on services has caused a sharper contrac-
tion in comparison with regional peers (Figure 4).
Lower domestic and public sector demand are also
affecting output as private consumption contracted
by 3 percent while public consumption fell by 11.4
percent owing to lower revenues. Some of the recent
gains made in poverty reduction will be lost as the
share of the population vulnerable to falling into pov-
erty increased because the share of the population
vulnerable to falling into poverty increased during
2020 (See Box 3).
Services and export-oriented sectors were
hit hard amid strong economic headwinds from
the pandemic. The services sector represents over 60
percent of GDP and was hit by a 13.3 percent decline
in the tradable services sector, mostly concentrated in
transportation and hospitality. Although interregional
flights showed some recovery during the summer
months, they sharply declined towards the end
of the year, primarily from the uncertainty caused
by the pandemic (Figure 5). These declines were
slightly offset by modest growth in agro-food and
petroleum refining sectors thanks to a favorable
harvest and resumption of activity in the national
refining industry (Société Tunisienne des Industries
de Raffinage – STIR). Industrial production declined
5.2 percent as both the domestic economy and major
trading partners registered negative growth for 2020.
Similarly, manufacturing and non-manufacturing
industries contracted by 9.3 and 8.8 percent during
2020. In the first quarter of 2021, exports increased
FiGuRE 3 • Nearly All Sectors Contracted in 2020…
100%Gr
owth
(%) b
y se
ctor
(YoY
)
GDP
grow
th (%
) YoY
–20%
60%
–60%
20%
–100%
0%
80%
–40%
40%
–80%
4
–6
2
–2
–8
0
–4
–1020192015 2020 2021
(Q1)2016 2017 2018
AgricultureNon-manufacturing industriesNon-tradable services
Tradable servicesManufacturing industries
GDP growth
National Institute of Statistics (INS).
FiGuRE 4 • …with Sharper Declines than Regional Peers
8
Real
GDP
gro
wth
(per
cent
)
Regional comparison of GDP growth
–2
6
–6
2
–10
0
–4
4
–8
20202019 2021 2022
TunisiaMoroccoEgyptJordan
World Bank, MENA Economic update, April 2021.
RECENT ECONOMiC DEVElOPMENTS 3
by 6.2 percent compared to the first quarter of 2020
while imports increased by 1.5 percent over the same
period, signaling the beginning of recovery for some
sectors. Exports in the mechanical and electrical
sector increased by 12.1 percent and those of the
textile-clothing-leather sector rose by 6.5 percent, while
those of the mining and energy sector decreased by
18.3 percent and 15.3 percent respectively. Imports
by the agriculture and agro-food sector increased by
20.9 percent and those of the mining sector rose by
13.4 percent.
Protests at energy and mining sites caused
large swings in production, reducing tax reve-
nues and development opportunities for lagging
regions. The energy and mining sectors play impor-
tant roles in the regional development—especially for
lagging regions—but also provide strong buffers to
external balances and tax revenues at the national
level. These sectors saw a sharp decline in produc-
tion (–80 percent) after the 2011 revolution and they
remain well below potential (Figure 6). During 2020,
mining production declined 13 percent after oil and
phosphate production was disturbed following social
unrest and regular protests in the southern regions.
Most of the energy and mining sites are located in the
poorest parts of the country with high unemployment
and are more sensitive to economic swings. Protests
began to appear in May 2020 near older sites in
Tataouine and Gafsa, but also in the recently started
Nawara gas field.2 Following the sharp decline imme-
diately post-revolution, total phosphate production
had steadily grown over the years, but is now down 21
percent compared to the beginning of 2020.
Domestic and international containment
measures are weighing on the income-generating
role of the private sector, jeopardizing social and
economic stability. A survey of 2,500 private firms in
November-December 2020 revealed that 65 percent
of firms risk permanent closure in the next 12 months,
and only 30 percent were confident they would sur-
vive until next year. By the end of the 2020, a total of
21.6 percent of companies were either permanently
or temporarily closed. Over 80 percent of businesses
saw a drop in demand, and as a result fired employ-
ees (26 percent) or cut wages (15.7 percent). The risk
of permanent closure was highest among micro-enter-
prises (70 percent), SMEs (62 percent), non-exporting
firms (70 percent), and large companies (48 percent).
Amid strong headwinds from the pandemic, the pri-
vate sector has made little headway in its struggle to
improve living standards and incomes, exacerbating
already simmering unrest.
Unemployment was high before the pan-
demic and worsened to 17.8 percent in 2021. The
labor force participation rate for women has improved
by 4 percent over the past ten years, offset by an
FiGuRE 5 • international Flights Recovered Only Temporarily
Weekly interregional flights
Inte
rregi
onal
flig
hts
(inde
x) 1.2
0.4
0.8
0.6
1.0
0.2
0.0
Jan-
20
Feb-
20
Mar
-20
Apr-2
0
May
-20
Jun-
20
Jul-2
0
Aug-
20
Sep-
20
Oct-2
0
Nov-2
0
Dec-
20
Jan-
21
Feb-
21
Mar
-21
TunisiaAlgeria MoroccoEgypt
World Bank, Global Aviation Dashboard.
FiGuRE 6 • Energy and Mining Sectors Still Far Below Potential
Energy and minig industrial production120
40
80
60
100
20
0
Jan-
10Se
p-10
May
-11
Jan-
12Se
p-12
May
-13
Jan-
14Se
p-14
May
-15
Jan-
16Se
p-16
May
-17
Jan-
18Se
p-18
May
-19
Jan-
20Se
p-20
IPIEnergyMining
INS.
2 For instance, in July, miners in Tataouine closed the valves for local distribution as a protest against the failure to implement an agreement the government signed on in November 2019, which provided for thousands of new jobs for the region.
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISIS4
BOx 1. BuilDiNG A GREEN, RESiliENT, AND iNCluSiVE AGRO-FOOD SECTOR
The agro-food sector demonstrated sound resilience during the COVID-19 pandemic, but at the same time lockdown measures again confirmed the limited economic inclusion of smallholder farmers. Unlike tourism and manufacturing sectors, agroculture contributed positively to growth during the pandemic, providing a small boost to food processing industries due to favorable harvest conditions. At the start of the pandemic, the cereal production campaign was already well advanced, and the olive harvest and oil processing were almost completed. During the lockdown, only the fishery industry was put to a complete halt with a severe impact on fishermen revenues. Subsectors linked to the tourism industry (poultry and meat) suffered from a serious demand reduction. As part of a qualitative survey carried out by the Bank in June 2020, 70 agro-industries were interviewed on the impact of the COVID-19 crisis on their activities. With the exception of the fishery and poultry subsectors, agro-industry representatives did not mention serious disruption in supply or commercialization as a concern but highlighted their major constraints as staff reduction and rotation, and the additional costs associated with sanitary measures. No severe disruption was recorded in food supply to urban markets and medium and large commercial farms remained connected to export markets.
Source: Institut National des Statistaiques (INS) and Livret annuel des statistiques agrocoles 2018 (Direction Générale des études et de développement agrocole), Observatoire National de l’Agroculture (ONAGRO), Groupement Interprofessionnel des Viandes rouges et du Lait (GIVLAIT), Groupement Interprofessionnel des Produits Avicoles et Cunicoles (GIPAC), Office National de l’Huile (ONH)
However, the crisis has had a higher impact on smallholders and had once again revealed their recurrent disconnect from input and output markets, their limited economic inclusion, and their vulnerability to shocks. During the lockdown, and in the absence of well-structured producer organizations and cooperatives, more than 80 percent of small farmers could not access agroculture inputs and commercialize their produce. As part of a field survey, carried out by L’institution de la Recherche et de l’Enseignement Supérieur Agrocoles (IRESA) and International Fund for Agrocultural Development (IFAD) in June 2020, 82.5 percent of small producers in the north (Siliana and Jendouba), 79 percent in the center (Kairouan and Mahdia) and 83.5 percent in the south (Kébili et Médenine) declared that they had to reduce their agrocultural activities because they could not purchase inputs, especially seeds, fertilizer, and animal feed, and were unable to commercialize their produce, especially dairy and vegetable productions. Access to temporary agrocultural work in larger farms and other off-farm job opportunities was also a major concern for small producers. As movement restrictions were eased for agrocultural activities, the situation improved but this experience confirmed the vulnerability of smallholder farmers, whose contribution to the country’s food security is important.
According to the last agrocultural census (ONAGRO 2005), Tunisian smallholder farmers represent 21.5 percent of the cultivated area but contribute to a large share of the domestic food production. Of the half million farms in Tunisia, 88 percent are family farms and 75 percent hold less than 10 hectares, but these represent 62 percent of the cereal production. But, only 5 percent of the Tunisian farmers belong to a producer organization and only 7 percent have access to credit.
Smallholder farmers remain isolated and vulnerable, but digital technologies have a significant potential to strengthen their resilience, and to ensure their financial and economic inclusion. In this context, characterized by a general defiance from farmers vis-à-vis cooperatives, digital technologies offer solutions to connect small producers to a wide range of technical and financial services, and to overcome market failures in the agro-food sector, such as market power, information asymmetries, and transaction costs. Digital tools can help small farmers remain connected with input suppliers, get up-to-date market information, and access technical information (such as plant disease identification or vet care advice) in order to become more resource-efficient and climate-resilient. Electronic marketing platforms have started to offer fresh vegetable produce to urban consumers. Digital technologies such as mobile money, digital credit
Economic growth by sector (%)15
–5
5
0
10
–10
–152016 2017 2018 2019 2020
Agriculture and fisheries
Non-manufacturing industries
Non-market activities (admin, domestic services, etc.)Market services
Manufacturing industries
Sub-sector annual production versus 2010–2020 average100%
–40%
20%
0%
–20%
60%
80%
40%
–60%2015 2016 2017 2018 2019 2020
Wheat DatesPoultry farming Dairy milkFisheriesOlive oil
(continued on next page)
RECENT ECONOMiC DEVElOPMENTS 5
equal decline for men. However, the employment rate
for men is 60 percent on average while for women
the rate is only 20 percent. Before the pandemic, the
unemployment rate stood at 14.9 percent and initially
spiked to 18 percent in the second quarter of 2020
in response to the challenges presented by the pan-
demic. After moderating to 16 percent in October, the
rate rose sharply to 17.4 percent by the end of the
year. This resulted in a 78,000 increase in the num-
ber of unemployed persons during the fourth quarter,
and an increase of 133,000 for the entire year. This
increase in unemployed definitely contributed to the
wave of protests breaking out around the country and
will continue to weigh heavily on recovery efforts. An
analysis of the distribution of employees shows that
52.8 percent are in the service sector, 17.9 percent
in the manufacturing industries sector, 16.0 percent
in the non-manufacturing industries sector, and 13.3
percent in the agriculture and fishing sector as of
2021. Most of these sectors registered contractions
in 2020, particularly in services and export-oriented
industries. The unemployment rate for females is far
higher than that for men (24.9 vs. 14.4 percent) and is
disproportionally concentrated in the interior regions
of the country. The unemployment rate for university
graduates continues to be above the national aver-
age, highlighting the limited job opportunities for
high-skilled workers and the structural mismatch in
the labor market.
The Socioeconomic Impact of COVID-19 on Household Welfare
Living standards have deteriorated for about half
of Tunisian households through the COVID-19
BOx 1. BuilDiNG A GREEN, RESiliENT, AND iNCluSiVE AGRO-FOOD SECTOR
BOx 2. HOW DiD COViD-19 AFFECT REGiONAl GROWTH? MONiTORiNG ECONOMiC ACTiViTY uSiNG NiGHT-TiME liGHTS
scoring, and remote sensing for insurance design have the potential, in rural areas especially, to reduce high transaction costs for credit access related to isolation, small scale, and risks. The Tunisian government is providing support to smallholders in the form of investment subsidies that they may not always be able to access independently due to administrative hurdles and requirements, literacy capacities, and other reasons. With higher levels of digital inclusion for farmers, these public support programs could become better targeted to the most vulnerable producers, and thereby be delivered in a more efficient and equitable manner.
Did COVID–19 affect growth in some regions of Tunisia more than others? We use satellite data on night–time lights, as a proxy to GDP growth, to explore the spatial distribution and evolution of the pandemic’s in Tunisia. The left panel shows the average luminosity by governate in 2019, while the right panel shows NTL gains (green) and losses (red) during 2020. Coastal governates emit the most NTLs given their large manufacturing, trade, and services sectors, while still developing inland and Southern governates are less bright. During 2020 however, the brightest coastal cities exhibited the sharpest declines. The largest contractions (year–on–year) were concentrated in Tunis (–10.7 percent), Ariana (–8.4 percent), Monastir (–8 percent), Sousse (–7.2 percent), Ben Arous (–6.5 percent), Nabeul (–4.6 percent), Manouba (–4.0 percent), Bizerte (–3.7 percent), Medenine (–2.6 percent), Mahdia (–2.5 percent), Gabes (–2.3 percent), Sfax (–1.1 percent).
(continued)
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISIS6
pandemic. Between March and October 2020, the
Institut National de la Statistique (INS), in collabora-
tion with the World Bank, implemented five rounds of
high-frequency telephone surveys. This nationally rep-
resentative panel dataset of about 1,000 households
allowed the assessment of the socioeconomic impact
of the COVID-19 over time. The survey results3 indi-
cate that the combined public health and economic
crises have had a sizeable negative effect on the
living standards of Tunisian households, particularly
among the most vulnerable (i.e., the bottom 40 per-
cent of the consumption distribution). More than half
of the households interviewed report a worsening of
their living standards relative to before the start of
the pandemic in March 2020 (Figure 7). This effect
moderated to 42.9 percent in the second half of the
June (round 4) but rose again to 45.9 percent in the
first half of October (round 5).
Living standards particularly worsened
among the poor and the bottom 40 percent.
In May 2020, 66.9 percent of households in the
lowest consumption quintile reported that their living
standards had worsened, compared to the situation
they faced in March (Figure 8). Estimates show that the
probability of declaring a worsening in living standards
is positively correlated with a lower degree of education
level of the household head and with being younger.
Individuals not employed at the time of the survey, the
self-employed, and contributing family workers have a
higher probability of reporting a deterioration of their
FiGuRE 7 • Household Reported Worsening in living Standards…
Round 5 14.3 0.331.6 50.0 3.7
21.7 32.4 42.3 3.5Round 2
10.9 0.232.0 50.4 6.6Round 4
15.4 33.9 46.6 4.1Round 3
40%Percent
0% 60% 80% 100%20%
Much worseMuch betterWorse Same
Better
Source: Alfani et al., 2021. Estimation based on data from the Enquête téléphonique auprès des ménages pour étudier et suivre l’impact du COVID19 sur le quotidien des Tunisiens, Institut national de la statistique (INS) and World Bank.
FiGuRE 8 • …Particularly among the lowest income Groups
40%Perc
ent
0%
60%80%
100%
20% poorest
1.132.0
32.4
34.5
2
0.931.2
36.8
31.1
3
3.440.0
32.9
23.7
20% richest
6.6
56.2
27.39.8
4
4.7
48.6
32.9
13.8
0.1
20%
3.232.3
39.7
24.8
20% poorest
2.638.5
39.0
20.0
2
6.0
44.9
33.6
16.5
3
5.2
52.4
32.310.1
4
3.2
60.6
26.49.7
0.1
20% richest
1.437.4
45.3
15.9
20% poorest
4.448.6
26.6
20.3
2
3.9
44.9
31.9
18.4
3
4.1
55.7
30.09.5
4
4.1
59.4
28.38.2
0.7
20% richest
40%Perc
ent
0%
60%80%
100%
20%
4.636.9
35.4
22.0
20% poorest
3.342.2
39.9
14.7
2
9.4
49.0
33.38.3
3
8.2
56.8
27.97.1
4
6.9
63.0
23.95.3
0.9
20% richest
40%Perc
ent
0%
60%80%
100%
20%40%Pe
rcen
t
0%
60%80%
100%
20%
Round 5
Round 2
Round 4
Round 3
Much worse Much betterWorse Same Better
World Bank, MENA Economic update, April 2021
3 Results reported in this section have been extracted from Alfani F., Dhrif D., Molini V., Pavelesku D., Ranzani M. 2021. “Living Standards of Tunisian Households in the midst of the COVID-19 Pandemic,” World Bank Policy Research Working Paper, Forthcoming.
RECENT ECONOMiC DEVElOPMENTS 7
living standards. Similarly, in the following rounds,
the percentage of households declaring worsening
living standards is consistently higher at the bottom
of the consumption distribution than the top. While
waiting for the economy to rebound, most vulnerable
households will continue to need income support.
A lack of demand from clients was the
primary contributing factor to a significant labor
income decline among the self-employed. By
October 2020, incomes had not yet bounced back to
the level observed before the onset of the COVID-19
pandemic, with labor income getting worse among
the self-employed (Figure 9). The main element
cited by respondents for their fall in income was a
lack of customers since the re-opening (from 28.3
percent in May to 47.6 percent in October). On the
other hand, the lockdown and subsequent closure
of workplaces was the main reason for the reduction
in income for 49.8 percent of self-employed in
early May (round 1) and 53.4 percent in late May
(round 2).
Safety net programs mitigated only par-
tially the negative effects of COVID-19 on the
poorest and more vulnerable ones. Although
public transfers, and particularly social protection
systems, usually provide a safety net for those who
lose their job giving them the means to look for new
employment, this kind of mitigation measures are
limited in scope and insufficient to avoid significant
increases in poverty. High unemployment and levels
of informality has created low coverage rates in the
country, although Tunisia has a comprehensive
social insurance system in place. Shortly after the
COVID-19 outbreak and subsequent lockdown, the
government introduced short-term work schemes
which included a wage subsidy of DT 200 per month
in April and May 2020 and a one-off cash transfer
of DT 200 for micro-enterprises (forfaitaire). About
110,000 micro-enterprises received the transfer,
while about 140 000 retirees whose monthly pension
is below TND 180 received 100 TND pension top-
up. In addition, about 1 million poor and vulnerable
FiGuRE 9 • Varying Reasons for the Decline in Business income
Round 5 47.3 16.8 29.0 6.5
4.8
8.0 5.453.4 28.4Round 2
1.9
49.8 28.3 6.7 13.3Round 1
50.4 10.8 37.1
1.7
Round 4
10.1 38.3 20.910.85.6 14.3Round 3
40%Percent
0% 60% 80% 100%20%
Closure of the establishment
Lack of liquidity Other reasons
Lack of customersLack of rawmaterials/manpower
Inability tomove/transport goods
Source: Alfani et al., 2021. Estimation based on data from the Enquête téléphonique auprès des ménages pour étudier et suivre l’impact du COVID19 sur le quotidien des Tunisiens, Institut national de la statistique (INS) and World Bank.
FiGuRE 10 • The Deterioration of Welfare Felt among Everyone
Male household head
Lower/No business income
5th consumption quintileRound 4Round 5
Primary education
Private sector employee
No salary
4th consumption quintile
65+
Not employed
Partial salary
3rd consumption quintile
45–64
Tertiary education
Self employed/employer
2nd consumption quintile
35–44
Secondary education
0.0
Welfare deterioration
0.2 0.4 0.6–0.2
**
**
**
**
**
***
***
***
***
***
***
***
***
***
***
***
***
***
*
Note: Probability of declaring a deterioration in living standards, as compared to the month before the interview. Estimation coefficients of the linear probability model. Reference categories: 15–34; no education; public sector employee; full salary, business income as usual or more than usual; Quintile 1; Round 3. Robust standard errors in parentheses. Statistical significance: *** p < 0.01, ** p< 0.05, * p < 0.1.
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISIS8
households received temporary benefits through a
vertical and horizontal expansion of existing SNN
– The AMEN Social program : (i) Two payments of
Cash transfer top-up of TND 50 for 260 000 poor
households reviving permanent cash transfer,
(ii) Two payments of Temporary Cash Transfer (TCT)
of TND 200 for 470 000 households benefiting from
subsidized health card and (iii) One payment of TCT
of TND 200 for additional 300 000 vulnerable house-
holds enrolled in the program through a simplified
process.
The effects of COVID-19 on poor and
vulnerable households will likely be felt for a
long time to come. Whereas everybody has, in
one way or another, been affected by COVID-19,
the effects of the disproportional exposure of poor
and vulnerable households to the pandemic will
be long term (Figure 10). In the short run, poverty
rates will increase. Once the recovery is under
way, poor and vulnerable people will continue to
experience the effects of prolonged income shocks
and diminished job opportunities. The preliminary
evidence indicates that the impact of the COVID-19
crisis affects the poorest strata of the population the
most. These individuals and households are facing
higher levels of food insecurity, job precarity, and
limited access to basic services, which, especially
in concert with one another, increase the existing
economic divide in the country.
The External Sector
External balances narrowed as imports fell
sharper than exports, lowering the trade bal-
ance overall. However, most of the reduction
came from lower commodity prices, which are
subject to rebound as the global economy re-
covers.
Weak demand from Tunisia’s main trad-
ing partners reduced demand for exports, yet
imports fell even further, lowering the trade
deficit overall. Tunisia’s exports registered an
11.1 percent drop in volumes and a 0.7 percent drop
in prices, registering a total contraction of 11.7 per-
cent in 2020. Notably, manufacturing exports yielded
a 19.7 decline, with mechanical and electrical indus-
tries falling 21.1 percent. These declines were slightly
offset by a 2.3 percent increase in refined products
exports, mainly due to a complete shutdown of
STIR in 2019, and 14.2 percent growth in agro-food
industries. Imports, on the other hand, fell by 18.7
percent, causing the trade deficit to shrink by 34
percent (Figure 11). Nearly half of this decline comes
from the lower energy deficit, caused by both lower
import volumes and prices. New gas production
in Nawara reduced imports of natural gas by 38.3
percent, while resumption of STIR activity reduced
imports of refined products by 45.3 percent. Weak
investment has caused capital imports to decline
FiGuRE 11 • Net Exports Shrinks, Moderating the Trade Deficit...
10
Net E
xpor
ts a
s %
of G
DP
–20
0
–10
–25
–15
5
–5
2019
2015
2014
2013
2012
2011
2010
2009
2020
2016
2017
2018
Agro-foodMiningMechanical and electrical
Textile & clothingOther manufactured
Energy
Trade deficit
Source: INS.
FiGuRE 12 • ...Mainly Caused by Savings on Energy imports
140%Current account deficit and energy imports
20%
100%
60%
0%
40%
120%
80%
12%
6%
5%
10%
8%
4%
7%
11%
9%
2019
2015
2014
2013
2012
2011
2010
2020
2016
2017
2018
Current account deficit (in % of GDP)Imports of energy products (in % of current deficit)
Source: INS and CBT.
RECENT ECONOMiC DEVElOPMENTS 9
FiGuRE 13 • Current Account Deficit Still Wider than Peers...
0Current Account as Percent of GDP
–4
–8
–10
–2
–6
2021 20222019 2020
Egypt Jordan TunisiaMorocco
World Bank, MENA Economic Update (April 2021).
FiGuRE 14 • …yet Borrowing Still largest Source of Financing
200%Sources of Financing of the Current Account Deficit
0%
–100%
100%
0%
–10%
–15%
–5%
2019 20202017 2018
ReservesBorrowingsDirect Investments
Portofolio InvestmentsNet errors and omissions
Current and capital account(% GDP)
CBT.
by 25.8 percent, which has negative implications on
growth and export potential in the medium-term. Dur-
ing the first quarter of 2021, exports increased 6.2
percent and imports 1.5 percent, thereby reducing
the trade deficit by 12 percent, signaling a gradual
recovery underway.
The current account deficit dropped from
8.5 percent of GDP to 6.8 percent in 2020,
as a lower trade deficit reduced pressure on
external balances. This decline was driven by the
strong reduction in the trade deficit, led mainly by
weak international demand and a lower energy bill.
Imports of energy products represent on average 90
percent of the current account deficit, highlighting
the sensitivity of the deficit to commodity price
swings (Figure 12). Tourism receipts declined by
59.8 percent in the wake of the economic fallout
of the pandemic. Despite the progressive lifting
of containment measures in most countries, non-
resident entries regressed 79.2 percent in 2020.
The decline in tourism receipts was slightly offset by
a 9.1 percent increase in remittances from abroad.
The current account deficit is relatively wider in
comparison with other countries, highlighting the
need to restore external balances to maintain long-
term stability (Figure 13). The deficit was financed
mainly by domestic and external borrowing, in
addition to a loan from the IMF under the Rapid
Financing Instrument (RFI) program (Figure 14).
Official reserves are at comfortable levels,
strengthened by resilient remittances and
reduced current account pressure. The narrowing
of the current account helped reduce pressure on
the exchange rate and increase foreign exchange
reserves, which climbed from 112 of merchandise
cover at the end of 2019 to 158 days at year-end
2020. As a result, the dinar has appreciated by
nearly 5 percent in 2020 to reach TND2.76 for US$1
which could impact exports in the near-term if this
trend continues (Figure 15). Less pressure on the
current account and financial support from the IMF
helped boost foreign exchange reserves,4 which
increased to US$8.3 billion by January 2021 against
US$7.4 billion at end 2019 (Figure 16). Reserves
came under pressure early in the pandemic, but a
lower current account deficit allowed reserves to
accumulate in the second half of 2020, alleviating
exchange rate concerns. Nevertheless, the dinar
remains vulnerable to the large structural current
account deficit, persistently weak economic
performance, and a commitment from the central
bank to limit interventions in FX markets. Concerns
over the government’s ability to implement structural
4 In 2020, Tunisia was able to access US$ 745 million under the IMF RFI to alleviate coronavirus-related pressures, helping stabilize reserves.
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISIS10
reforms can place downward pressure on the
exchange rate.
Fiscal Policy
The crisis caused by the pandemic increased
debt to higher levels, while fiscal risks were
already a concern. Given this, along with the dif-
ficulties in implementing fiscal reform, the credit
profile has worsened, making financing difficult
to secure.
Despite recent gains in balancing the
budget, lower tax revenues and higher covid-19
spending widened the fiscal deficit. In 2020, the
fiscal deficit swelled to 10.4 percent of GDP, a sharp
departure from the years before (Figure 13). This effect
was due to the economic fallout from the pandemic
and a denominator effect from lower output. The
deficit widened on account of lower tax revenues
(76 percent) and higher expenditures (24 percent).
On the expenditure side, higher outlays on transfers
and interventions (58 percent of expenditures) were
partially offset by a reduction in capital investment
(–34 percent). Higher expenditures on subsidies
grew steadily over the past 10 years and stood at
5.2 percent of GDP in 2020, particularly in cereals
(77 percent), milk (10 percent), and energy products
(10 percent), which continues to weigh heavily on
fiscal balances (Figure 18). During the first quarter of
2021, the fiscal deficit declined by 27 percent due to
an increase in tax receipts (13 percent) and decrease
in investment (–37 percent) and expenditures
(–2.3 percent).
Public debt levels are becoming less con-
sistent with sustainability and SOEs’ guarantees
add heavy tail risk. With the higher fiscal deficit, pub-
lic debt sharply increased to 88 percent of GDP, well
above the emerging market benchmark of 70 percent
(Figure 17). Structural economic indicators were weak
before the pandemic and sluggish economic growth,
coupled with chronic twin deficits, helped push
up public debt levels over the years. Outstanding
SOE debt that is guaranteed by the government is
estimated at 35 percent of GDP excluding cross-debt
between SOEs.5 The majority of this debt is held by
social security funds, banks, and the public sector
adding significant financial risk to fiscal balances if
defaults emerge. As of 2020, the most indebted pub-
lic enterprises are: STEG (11 percent of GDP), Social
Security Funds (8 percent), Tunisair (3 percent), STIR
(3 percent), Cereals Office (2 percent) and Tunisie
Autoroutes (2 percent). Any SOE debt in default would
effectively be transferred to the government’s balance
sheets, pushing the total public debt ratio above
100 percent of GDP. On a positive note, the bulk of
Tunisia debt is held by bilateral donor and multilateral
institutions with long maturities, low interest rates, and
third-party sovereign guarantees.
Moody’s has downgraded, for the 7th
time since 2011, the sovereign rating of Tunisia
FiGuRE 15 • A Narrow Current Account Appreciates the Dinar
4.0Tunisia’s exchange rate against USD and EUR
3.0
2.0
1.0
1.5
3.5
2.5
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
USD/TND EUR/TND
CBT.
FiGuRE 16 • less Pressure on CA Boosts Fx Reserves
P21..=1VV-3-/:=2;.;2K;.=>WH[=G-::-1,@
6Gross official reserves
4
2
01
5
3
12,000
8,000
4,000
02,000
10,000
6,000
2019
(est
.)
2015
2014
2013
2012
2011
2010
2009
2020
(pro
j.)
2016
2017
2018
Gross official reserves (US$ billion)Gross official reserves (in months of GNFS imports)
CBT.
5 IMF Tunisia Article IV Consultation – February 2021.
RECENT ECONOMiC DEVElOPMENTS 11
FiGuRE 17 • Fiscal Deficit Balloons Public Debt to Record levels…
100Public debt and fiscal defict as percent of GDP
60
20
0
80
40
70
30
10
90
50
12
8
4
0
2
10
6
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
(est
)
2021
(est
)
Fiscal deficit (RHS)Public debt (LHS)
MoF.
FiGuRE 18 • …while Subsidies Continue to put Pressure on Budget
3,000Food subsidies by product (millions TND)
1,000
0
2,000
1,500
2,500
500
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Cereals Vegetable oils School notebookSugar Pasta and couscousMilk
MoF.
which is now B3 (non-investment grade) with
a negative outlook. Moreover, in May 2021, S&P
lowered the long-term ratings of three Tunisian banks,
Arab Tunisian Bank, BH Bank, Banque de Tunisie et
des Emirats to CCC+ from B– previously. The credit
agency cited the economic blow from the pandemic to
the Tunisian economy, the ongoing political instability
in the country, and the increasing exposure of banks
to sovereign debt as reasons for this downgrade. S&P
estimated that sovereign debt default of Tunisia over
the next 12 months “remains highly unlikely,” but if
it were to happen it would cost banks between $4.3
billion and $7.9 billion, or 55 percent to 102 percent
of their equity. To maintain access to international
markets and external resources, an agreement
on new structural reform programs, including with
partners such as the IMF, would provide donors
and international rating agencies some confidence.
Meanwhile, the risk of an early election in 2021
has diminished, easing concern about accessing
financing during an election period. The ability to
carry out the necessary reforms in the public sector
in terms of financing, governance and spending is the
government’s major short-term challenge.
Despite strong mobilization to meet total
borrowing needs of US$6 billion, the authorities
will need an agreement with the IMF to finance
the budget. In October 2020, the government
mobilized US$465 million in financing from 14
Tunisian commercial banks and a US$1.5 billion loan
facility from the International Islamic Trade Finance
Corporation.6 This agreement aims, in particular,
to support key SOEs in the financing of imports
of essential products such as energy and other
industrial products. In December 2020, parliament
voted to allow the central bank to extend a one-time,
five-year, zero-interest loan of TND2.81 billion. Without
meaningful fiscal reform, the IMF has implied that
international partners might be reluctant to provide the
loans Tunisia needs to finance the budget. This would
present a significant problem for the government as
the 2021 budget sets a borrowing target of TD18bn
(US$6 billion), of which TD13bn is planned to come
from abroad. Tunisia’s last Extended Fund Facility
(EFF) with the IMF expired in May 2020, and efforts to
agree on a new EFF would facilitate sovereign bond
issuance (up to US$3 billion) that the government is
planning.
The average civil salary has doubled in
nominal terms since 2011, placing Tunisia’s civil
service wage bill among the highest in the world.
Higher spending on wages crowds out spending
on social programs or growth-enhancing capital
investment. The wage bill grew from 10.7 percent
6 These loans—in US$ and EUR—are repayable over five years with interest rates ranging from 2 percent to 3.5 percent.
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISIS12
FiGuRE 19 • Despite Rising Concern, Public Wage Bill Grows…
20%Civil service wage bill
12%
4%
0%
16%
8%
14%
6%
2%
18%
10%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Wage bill growth (nominal)Wage bill (percent of GDP)
MoF.
FiGuRE 20 • …with interior and Defense Shares Doubling
12%Interior and defense spending as percent of GDP
4%
0%
8%
6%
10%
2%
20%
12%
4%
0%2%
16%
8%
18%
10%
14%
6%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
% of total budgetMinistry of Interior Ministry of Defense
MoF.
of GDP in 2011 to 17.6 percent in 2020 (Figure 19).
This is three times the size of public investment and
six times the size of spending on social programs.
In real terms, the wage bill grew at an average rate
of 5.4% while headcount additions grew at 5.5%
y-o-y.7 Indeed, the authorities approved a wage hike
in 2019 worth 1.5 percent of GDP after having to
accept a package of legacy wage hikes approved by
previous governments. This trend moderated in 2020,
though another increase was approved following an
agreement with labor unions worth 0.3 percent of GDP.
The size of civil staff grew steadily since the revolution,
with many new recruits employed in manual labor or
holding low qualifications. Security personnel saw a
sharp increase following the 2015 terrorist attack to
address domestic and regional security concerns.
Increased spending by the Ministry of Interior and
Ministry of Defense has seen their share of the budget
to nearly double since 2010 (Figure 20).
In response to the crisis caused by the
pandemic, the government enacted emergency
policy measures of about 4.3 percent of GDP.
A dedicated fund was created to procure medical
supplies and provide financial assistance to affected
sectors such as tourism and hospitality. To support
businesses, the authorities temporarily suspended
penalties, introduced an interest rate subsidy, and
accelerated VAT reimbursements. The CBT lowered
the policy rate twice and relaxed loan-to-deposit
ratios, increasing credit availability. The government
also extended support for the unemployed and self-
employed, and expanded direct cash transfers to
low-income households. The fund was financed by
voluntary contributions, withholding one day of salary,
increasing interest on bank deposits, and increasing
taxes on financial companies during 2021. To ensure
the proper use of collected funds, a commission led
by the Minister of Health was created to oversee the
fund’s governance and will be audited by the Court
of Audits.
Monetary Policy and Inflation
The central bank played a key role in managing
the crisis by cutting rates and implementing
various recovery programs. Although most of the
credit to the economy is soaked up by the public
sector, which is heavily exposed to loss-making
SOEs.
Despite weak demand and low prices of
imported commodities, rising domestic food
prices prevented a sharper fall in inflation. The
inflation rate fell from 7.3 percent in 2018 to average
of 5.6 percent in 2020, providing much needed space
for looser monetary policy (Figure 21). Since the start
of the 2020, inflation experienced a downward trend
except for a temporary hike in prices during the first
7 IMF Tunisia Article IV Consultation - February 2021.
RECENT ECONOMiC DEVElOPMENTS 13
month of lockdown, caused mainly by supply chain
disruptions and shifting consumer behavior. In March
2021, the inflation rate stabilized at 4.9 percent for
the fifth consecutive month. Food inflation stood
at 4.9 percent (2.9 percent in 2019) and was led by
a 13.5 percent increase in vegetables prices and a
5.7 percent increase in “milk, cheese, and eggs.”
Food price inflation disproportionately affects low-
income households as they spend a larger share of
consumption on food items. Year on year, the prices
of manufactured products increased by 4.6 percent
due to the rise in the prices of building materials
and daily household maintenance products. For
services, prices increased by 5.3 percent over one
year due to the increase in prices for restaurant and
café services by 10.8 percent and health services by
6.8 percent. During April 2021, excluding food and
energy, inflation reached 5.5 percent, with health
services’ prices rising by 8.8 percent and hotels and
restaurants prices increasing by 9.2 percent.
The CBT shifted away from monetary
tightening and cut rates twice in 2020, while
lower inflation provided space for further
adjustment. To keep the interest rate positive in real
terms, a series of target rate hikes between 2017
and 2019 helped bring the inflation rate down, which
provided much needed space for counter-cyclical
monetary policy during the pandemic. In March
2020, rates were reduced by 100 basis points to
6.75 percent in to support the economy following the
initial outbreak and were further reduced by 50 basis
points in September as cases intensified (Figure 21).
More space for monetary easing would be available if
inflation continues to slow further.
Looser monetary policy increased
total credit to the economy, but credits to the
government grew faster than the private sector.
Broad money (M3) grew at an average rate of 6.7
percent in 2020 after growing just 1.8 percent the
year before. Credit to the economy was shrinking in
real terms throughout 2019 and only began to grow
following the policy rate cut in March 2020. As a result,
credit to the economy grew at an average rate of 1.1
percent in 2020, while credit to the government grew
at an average of 18.8 percent (Figure 22).8 Banking
sector exposure to the government, through securities
and direct lending has edged upwards as credit to
the government increased by 45 percent in 2020
(compared to 16 percent in 2019). Exposure increased
across the board, but stocks may be concentrated in
a number of banks with state participation.
The banking sector played a smaller
counter-cyclical role due to high ratio of NPLs
and exposure to loss-making SOEs. Banks’
FiGuRE 21 • lower inflation Provides Space for Rate Cuts…
11%Infation and Interest Rates
–4%
1%
6%
Jan-
16
May
-16
Sep-
16
Jan-
17
May
-17
Sep-
17
Jan-
18
May
-18
Sep-
18
Jan-
19
May
-19
Sep-
19
Jan-
20
May
-20
Sep-
20
Jan-
21
Money Market Average RatesTarget Rate Real market rateInflation
CBT,
FiGuRE 22 • …yet Most Credit is Soaked up by the Public Sector
50%Money Supply and Access to Credit
–20%
–10%
20%
40%
10%
30%
0%
Jan-
16
May
-16
Sep-
16
Jan-
17
May
-17
Sep-
17
Jan-
18
May
-18
Sep-
18
Jan-
19
May
-19
Sep-
19
Jan-
20
May
-20
Sep-
20
Jan-
21
M3 (real)Credit to the government (real)Credit to the economy (real)
CBT.
8 Given the size of gross financing needs for the 2021 budget, (TND6bn to be raised domestically) Tunisia’s Ministry of Economy and Finance signed a syndicated loan agreement of US$465 million with 14 local banks in 2020.
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISIS14
already-high levels (close to 14 percent) of legacy
non-performing loans (NPLs) are expected to rise
further with COVID-19. Although the central bank
added provisioning requirements on the exposures
that were affected by the pandemic (mainly on non-
incurred losses) in December 2020, the ability of
these requirement in covering the full extent of
the risks will be dependent upon the shape of the
economic recovery. The central bank indicated a plan
to conduct an asset quality review. A new circular to
set up workout units in banks is also planned to be
issued by July 2021 as part of the holistic strategy
on NPL prevention and resolution. The persistence
of a high stock of NPLs on banks’ balance sheets,
particularly in SOEs,9 coupled with low liquidity, are
sources of vulnerabilities which constrain banks’
lending capacity and their ability to play a counter
cyclical role during the pandemic. As of December
2020, the growth of bank credit to the private sector
remained very low in real terms, at about 1 percent.
Pro-active measures led by the CBT
helped support households and firms during the
COVID-19 crisis. In addition to cutting the policy rate,
the loan-to-deposit ratio was relaxed for the banking
sector, increasing liquidity and credit availability
to the economy. The CBT requested local banks
to temporarily defer loan repayments for affected
businesses and extended the list of assets eligible
as collateral for refinancing. Withdrawal fees, fees for
electronic payments less than TND100, and dividend
payments by banks were suspended. In response to
higher fiscal demands, the CBT provided a one-time
zero-interest loan to the government (2.5 percent of
GDP) to help reduce economic pressure on citizens.
This CBT financing of the government can be justified
given the severe crisis and need to expand social
assistance programs in the midst of the pandemic.
However, further financing of the budget would
undermine the independence of the central bank,
signal to markets the possibility of an inflationary
deficit financing, and lack of willingness to undertake
necessary fiscal reforms.
Steps were taken by the authorities to
mitigate the adverse impacts of the pandemic
on the financial sector. However, downside
risks remain. The extension of the loan repayment
moratoria to all loans until 2021 may have mitigated
the impacts of COVID on banks’ balance sheets but
there is a risk of deterioration in asset quality once
all moratoria are lifted. Vulnerabilities in the financial
sector could emerge in the form of a concentration
of credit risk in some sectors such as tourism or
real estate or of high exposure to troubled SOEs.
The annual report on public entities, annexed to the
2021 budget, estimates the debt of 33 entities at
approximately 35 percent of GDP as of end 2019. The
capacity of the government to extend financial support
to banks if needed is questionable as suggested with
the negative outlook on Tunisia’s sovereign rating
and can further deteriorate credit fundamentals of
the banking sector and increase impacts on the real
economy.
9 Although NPL rates seem to have stabilized in recent years, certain sectors have barely seen any improvements since reaching their peak in 2015. In fact, the NPL ratio increased in 2019 from 13 percent to 14 percent, reversing a decreasing trend since 2015. This is an excessively high ratio beyond which most international institutions recommend that swift actions be taken by the authorities. In public banks, NPLs reached 22 percent in 2017 and 46.5 percent of loans in the tourism sector were NPLs in September 2019.
15
OUTLOOK AND RISKS
T he growth outlook points towards a
gradual recovery as the global economy
regains traction in 2021. However,
significant downside risks remain in the absence
of a credible structural reform plan.
The authorities have been pro-active in
sourcing vaccines, but a long road ahead still
remains. So far, the government has agreements
to purchase 2 million vaccines from Pfizer-BioNTech
and hopes to source another 4 million through the
COVAX initiative.10 An agreement to speed up the
delivery of 1 million Russian “Sputnik V” vaccines was
reached in March 2020. These 7 million doses are
enough to vaccinate 3.5 million people, out of an adult
population of about 9 million. So far, the authorities
have secured 1.2M doses as of May and aims to
vaccinate half the population by end of 2021. This
means about 11M doses; procurement of about 6.5
doses has already been secured (61 percent of total
needs), negotiations are ongoing for about 3M of the
remaining (through the African Union procurement
process).
Economic output is not projected to return
to pre-pandemic levels until 2024, due to pre-
existing structural weaknesses, a gradual global
recovery, and a slow path towards eliminating
COVID-19 in Tunisia given the projected pace of
vaccination. The real economy is projected to grow
by 4 percent in 2021 before quick moderation back to
historical growth rates of 2.2–2.6 percent11 (Figure 23).
The magnitude of the recovery will depend on the
evolution of the pandemic in major trading countries
and normalization of supply chains, providing a revival
in exports and services. In comparison with regional
peers, Tunisia has been hit hard by the pandemic,
due mainly to high trade openness and reliance on
services (Figure 24). A successful and comprehensive
vaccination program would release pent-up private
consumption and boost tourism activity, lifting growth
in the near term.
The current account deficit is expected to
widen to 9.2 percent of GDP in 2021 as imports
begin to recover and commodity prices rise.
As the pandemic wanes and trade flows recover,
manufactured exports and tourism arrivals are
2
10 COVAX is a vaccine access initiative led by the World Health Organization and is set to provide coronavirus vaccines to low- and middle-income countries (LMICs).
11 World Bank April 2021 Forecast (Spring Meetings).
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISIS16
expected to pick-up gradually, supporting a gradual
reduction in the current account deficit to 8.9 percent
of GDP by 2023. But risks to the external outlook
remain high, including a sluggish recovery in exports,
given the heavy impact of the pandemic on firm
capacity and the pace of recovery amongst Tunisia’s
main trading partners. As exports pick up, import
spending will also rise, owing to both higher demand
and commodity prices, particularly for oil. Since Q4
2020, oil prices have risen by 70 percent from an
average of US$40 to US$68 as of March 2021. A
revival in exports is therefore necessary to offset
growth in imports to keep external balances and
foreign reserves at healthy levels. Tourism receipts are
projected to slightly recover as containment measures
are lifted domestically and abroad but remain to be
still weak given the Tunisia’s high COVID-19 exposure
and low vaccination rates.
Financing needs are projected to remain
elevated in the medium-term given the extent
of the pandemic’s impact on the economy. The
financing of the public sector will be particularly
challenging in 2021, with an expected fiscal deficit
of 8.6 percent of GDP, as the authorities deal with
the pandemic and maintain support to households,
but with depleted fiscal buffers. In particular, meeting
the 2021 budget’s external financing needs will
be challenging given the deterioration of the fiscal
setting alongside the recent sovereign credit rating
downgrade. An agreement with the IMF on a
medium-term program and the implementation of
fiscal adjustment reforms would support the fiscal
outlook. On the bright side, tax revenue will improve
with the unification of the dual tax system, which until
recently applied different rates for export-oriented
and domestic firms. As economic conditions recover,
tax revenue from personal incomes, corporations,
and customs, will help raise government revenues.
On the expenditure side, spending as a proportion
of GDP will moderate going forward, reflecting the
fact that some of the coronavirus-related stimulus will
wane.
Contingent liabilities of SOEs could exacer-
bate government finances, especially in affected
sectors such as utilities and transport that remain
vulnerable following the economic fallout of the
pandemic. Capital spending is projected to contract
as the authorities continue to delay non-priority,
non-health, and education programs. Yet, although
the government agrees that rationalization of expen-
diture is necessary, it will be a complex undertaking
to implement such measures given the economic
downturn, violent protests over unemployment and
falling living standards, and limited consensus on
critical fiscal reforms. In that context, public debt
is projected to rise to 91.2 percent of GDP in 2021
and could rise further if global demand remains
depressed. Moreover, if low-cost long-term financing
is not secured, costlier short-term debt would exacer-
bate the repayment burden.
FiGuRE 23 • Output Will Not Recover before 2024…
76
TND
(bill
ion)
GDP levels and growth
Perc
ent g
row
th (Y
oY)
64
72
60
68
58
66
74
62
70
6
4
–6
2
–2
–8
0
–4
–1020
19
2015
2014
2013
2012
2020
2021
2022
2023
2016
2017
2018
GDP level GDP growth
World Bank, Macro-Poverty Outlook.
FiGuRE 24 • …due to the Sharper Contraction in 2020
8%Regional comparison of real GDP growth
–4%
4%
–8%
0%
–10%
–2%
6%
–6%
2%
2019 2020 20212017 2018
Developing countries Middle East & North AfricaEurope & Central Asia Tunisia
World Bank, World Development Indicators.
OuTlOOk AND RiSkS 17
Despite the delicate socio-political con-
text, the authorities will need fiscal discipline
to balance between public investment, social
spending, and a quick macroeconomic recovery.
The immediate priority of the authorities has been to
address ongoing health concerns together with the
economic impact on affected sectors while preparing
for vaccine procurement and distribution. At the same
time, there is a need to improve macroeconomic and
external conditions, as well as implement deep struc-
tural reforms to boost growth, all while keeping fiscal
balances in check. Among the most important fiscal
reforms are reducing the wage bill, optimizing subsidy
targeting, re-evaluating the public sector’s relationship
with loss-making SOEs, and strengthening tax collec-
tion and equity to encourage the grey economy to join
the formal system. Still, further investment is needed
to improve access to health and education in lagging
regions and strengthening social safety nets. This will
be challenging in the fractured political setting and
the neglected economic environment that are fueling
public discontent and social unrest, jeopardizing
growth prospects for the future.
The fractured coalition government brings
together long-time rivals across the secular-
Islamist divide, making consensus on policy
harder to reach. While post-revolution governments
have been focused on building stronger democratic
institutions, a neglected economic environment is
fueling public discontent and social unrest, thereby
jeopardizing growth prospects for the future. The
pandemic has intensified structural deficiencies and
heightened social frustration, which could lead to
more social instability in 2021.
19
SPECIAL FOCUS: ASSESSMENT OF THE DIGITAL TRANSITION IN TUNISIA
Why Digitization?
Digital transformation is now at the forefront of
economic development agendas and provides
a unique opportunity for countries to acceler-
ate economic growth and connect citizens to
services and employment. In times of crisis, from
natural disasters to pandemics such as the one the
world experienced with COVID-19, digital technolo-
gies allow citizens, governments, and businesses to
communicate and remain in operation. Digital trans-
formation can unlock innovative solutions to complex
development challenges and provide opportunities
for countries to leapfrog traditional development
stages, in sectors such as digital financial ser-
vices, disruptive technologies (AI, blockchain), and
telemedicine.
The digitization of government services
results in cost efficiency for public administration,
supports the delivery of improved and user centric
government services to businesses and citizens,
and improves efficiencies in areas such as
public procurement, tax collection, and customs
operations. Better and more flexible contacts with
citizens, especially those living in remote or less
densely populated areas become widely available.
Indirect effects include greater transparency and
accountability of government institutions, helping
policy makers improve social inclusion and civic
engagement. By opening access to data, governments
can improve anti-corruption efforts while simplifying
monitoring and evaluation. Additionally, open data
empowers users to make better informed decisions,
at both the personal and professional levels.
Digitization of products, processes, and
organizations create incentives for firms to invest
in intangible digital assets, providing new sources
of value for customers. For example, traditional firms
can expand their existing physical product lines with
digital features or ancillary on-line services to enhance
value provided to customers. New firms running their
business entirely online can emerge and provide
pure digital goods or services. For traditional firms,
digital technologies provide the potential to expand
access to new markets and opportunities, eventually
benefiting from exposure to both domestic and
international markets, allowing goods and services
to cross borders. In particular, non-tradable services
that required physical proximity can now be traded
over the internet. As a result, firms are increasingly
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISIS20
exploiting the digitization of the economy and tapping
into new sources of value creation.
Digital transformation is spurring innova-
tion, allowing the creation of new business
models, accelerating speed and productivity, and
driving structural change across the economy.
Digital transformation allows competition to flourish
by providing a business-friendly environment where
foreign and domestic firms can compete, ideally on
equal footing, without unnecessary restrictions and
conditions. Furthermore, by lowering barriers to
competition, the digitization of the economy promotes
decentralization, often empowering the edges rather
than the center. Geographic market boundaries are
less binding since the internet is facilitating access to
digital suppliers that do not need to have a physical
presence in all markets in which they sell. This, in
turn, benefits consumers through lower prices and a
higher variety of good and services offered, while also
providing new jobs and opportunities for economic
growth.
Tunisia’s Digital Strengths
Tunisia has one of the most developed mobile broadband infrastructures in the North African region. The mobile population coverage stood at
99.9 percent for 3G, 94.9 percent for 4G (2020),12
and a high associated penetration rate at 76.1
percent (including a majority—(ISP)57 percent—of 4G
subscriptions). The mobile market is very dynamic,
with three Mobile Network Operators (MNO), one
Mobile Virtual Network Operator (MNVO) and seven
Internet Service Providers (ISP),13 and competitive
(total penetration of mobile phone users reached 126
percent in 2020) with no significant market incumbent
and driven by growing data usage in Tunisia.14
The Republic of Tunisia is revising its
digital development strategy for 2025 and its
digital regulation. This work aims at positioning
digital technology more than ever at the heart of the
country’s sustainable digital and social development
and is based on the following priorities: Digital and
financial inclusion, Tunisia digital hub, digitization
of the administration, advanced technologies (AI,
blockchain), cybersecurity, job-creation, and skills
development.
Tunisia’s population is young and educat-
ed, with a strong appetite for digital technologies.
About half of the population is under the age of 30.
Tunisia has invested intensively in education since
its independence. As a result, the average number
of years of study has increased from 1.6 in 1960
to 7.5 in 2010 with a primary school enrolment rate
close to 100 percent (98.6 percent in 2013) and the
illiteracy rate dropped from 84.7 percent in 1956 to
19.3 percent in 2014. The Tunisian population shows
a strong appetite for digital services, with 7,650,000
Facebook accounts end of 2020, accounting for
65 percent of the total population. In addition to be-
ing a strong driver of demand, the young Tunisian
population is also a talent pool of entrepreneurs
and digital technicians. Tunisia trains around 25,000
science, technology, engineering, and math (STEM)
graduates each year, including 8,000 engineers
(only second to Egypt in Africa in terms of number of
engineers trained). According to UNESCO, in 2018,
43 percent of Tunisian tertiary students graduated
FiGuRE 25 • Maturity of the Pillars of the Digital Economy
0.00.51.01.52.02.53.0
Impacts of the digitaltransformation
Citizens/consumersand digital use
Digital transformationof the private sector
Digital transformationof the public sector
Digital sector
Digital foundations
Analog foundations
Diagnostic de l’Economie Numerique de la Tunisie, World Bank.
12 INTT – Revue Internationale des Télécommunications - Positionnement international de la Tunisie – Année 2020
13 MNO: Tunisie Telecom, Ooredoo Tunisie, Orange Tunisie. MVNO: Lycamobile. ISP: BEE, Globalnet, Hexabyte, Ooredoo Internet, Orane internet, Topnet, Tunisie Telecom.
14 Growing revenues of mobile broadband (+25 percent p.a. over the 2015–2019 period) compensated for the decline of mobile voice (–4 percent p.a.)
SPECiAl FOCuS: ASSESSMENT OF THE DiGiTAl TRANSiTiON iN TuNiSiA 21
in a STEM field, which was the highest ratio in the
world.
Tunisia’s Missed Opportunities and Areas of Improvement
Although Tunisia has one of the most developed
mobile infrastructures in the North African
region, it is not without its shortcomings. The
Tunisian landscape is characterized by (i) a strong
predominance of the mobile connections (mobile
data penetration 76.1 percent15) to the detriment
of fixed connections (fixed data penetration 11.5
percent); (ii) a de facto monopoly situation of Tunisie
Telecom on segments of the fixed line infrastructure;
and (iii) an overall poor quality of the service with an
average download speed considered to be low.16 Also
infrastructure gaps between urban and rural areas
persist, specifically in fiber optic deployments.
Despite the many initiatives launched,
digital platforms are still not very present, and
the maturity of digital financial services is low
on both the supply and demand sides. Only 30
percent of adults over 15 years old made or received
a digital payment in 2018, compared to an average
above 33 percent in the MENA region. So far, the
Government of Tunisia’s aspirations to support
transformation of the digital economic of the country,
and the different projects and initiatives underway in
different sectors (administrative and social services,
e-education, e-health, and e-culture17), have translated
to little progress. Key difficulties include the lack of
coordination between the different actors as digital
projects are progressing slowly and are carried out
in silos, and ineffective governance mechanisms.
Nonetheless, the Government of Tunisia has the
opportunity to accelerate the digital transformation as
well as the enabling environment to raise Tunisia to
international best practices countries (e.g., update and
adopt laws and regulations to the standards needed),
including for the regulatory framework governing the
digital ecosystem.
The digital sector is not large enough to
act as a locomotive for the transformation of the
entire Tunisian economy.18 The ICT sector has,
admittedly, achieved positive developments over the
last decade, despite an unstable fiscal framework, but
its contribution to GDP remains limited to 4.3 percent
in 2017 (against 2.5 percent in 2002). This sector
remains negatively affected by the lack of digital skills
as a result of the insufficient matching of ICT training to
the skills needs of the labor market, and the difficulties
companies have in retaining their skilled workers,
despite numerous initiatives to address these issues.
According to the Tunisian Order of Engineers (OIT),
nearly 3,000 Tunisian engineers leave the country
each year, mostly to European countries, which is
equivalent to about a third of the engineers trained
each year.
The private sector is slowly embracing the
digital transformation. Despite recent improvements
in the business environment from a legal and regulatory
perspective, the Tunisian economy remains a highly
centralized form of governance with a dominant
public sector. The challenges for Tunisia remain
the need for a conducive business environment to
enable businesses to further develop, poor access
to finance, low level of competition, and a complex
and unequal tax system that lacks transparency.
The government of Tunisia has launched several
initiatives aiming to accelerate digital transformation
of the private sector, but the efforts are hampered by
a low level of adoption of new emerging technologies
by businesses and the difficulties in retaining digital
15 Instance Nationale des Télécommunication Observatoire INT 2020 http://www.intt.tn/upload/files/RIT-2020.pdf
16 According to the latest SpeedTest Global Index (Avril 2020), Tunisia ranked 75th out of 134 countries on average mobile download speed and 165th out of 176 countries on average fixed broadband download speed.
17 Examples of such projects include, but are not limited to, the RNIA projects (Réseau National Intégré de l’Administration) with the objective of interconnecting more than 1200 government sites at central, regional and local levels; the GovTech project to improve equitable access to, and the quality and accountability of, selected Social Protection and Education services; and the Innovative Startups and Small and Medium Enterprises Project for Tunisia, which aims to increase access to finance and support the growth of innovative startups and small and medium enterprises.
18 WBG Digital Economy Country Assessment Tunisia 2020.
TUNISIA ECONOMIC MONITOR – NAVIGATING OUT OF THE CRISIS22
skilled employees. In addition, there are significant
and persistent differences between regions in usage
of technology, as a proxy for assessing digital maturity
of companies.
Recommendations to Accelerate the Digital Transformation
Further progress on the maturity of Tunisia’s
digital economy can be made by improving the
digital environment, policies, and regulations.
Such reform would include removing regulatory and
administrative barriers to international transactions
(goods, services) via digital tools. This implies the
revision, among others, of the foreign exchange
code, the trade code, and the customs code.
Additional reforms should include removing barriers
to entry for activities related to the digital economy
(such as authorizations, specifications, etc.). The
government could also accelerate the adoption of the
new digital code in order to allow the digital sector
to play its role as a locomotive. In this vein, various
actions are proposed for the medium and long term.
These include strengthening access to fixed internet
services with an improved infrastructure and more
encouraging pricing, reviewing the overall policy
of taxation of the digital sector, and rethinking the
operation of the Telecom Fund by facilitating its use
and the allocation of part of its resources to reduce
the regional digital divide. Finally, the governance of
the digital strategy and the government’s capacity
to implement the strategy could be improved and
by establishing a federative leadership, clarifying the
roles and responsibilities of the various government
entities, aligning the objectives of each of the projects
and processes
Expanding digital skills is at the heart of
creating a vibrant digital economy and will require
public support to encourage its development.
Initial actions are recommended to involve the private
sector in the governance of ICT training programs and
to put in place agile institutional mechanisms to allow
for the rapid updating of these programs. There is
also an urgent need to improve the retention capacity
of digital skills, by reinforcing the attractiveness of
job offers with encouraging career development
prospects. These actions should be accompanied,
in the medium term, by the definition of a long-term
vision of skills needs in line with the socio-economic
development strategy and sectoral strategies. In the
same time frame, the development of professional
retraining programs in digital technologies as well
as rapid training in digital skills for higher education
graduates is strongly recommended.
Accelerate the implementation of digital
financial services to advance a complete digital
ecosystem for e-commerce. In the short term, it is
important to strengthen confidence in digital financial
services through various targeted actions (adoption of
the personal data protection law, protection of users
of digital payment instruments, standardization of
complaint and dispute resolution procedures). It is also
crucial to develop the use of digital payments through
a strong incentive policy for merchants, the digitization
of public services’ payments, and the implementation
of communication and financial education programs.
In the long term, it is necessary to promote access to
and use of a transaction account, diversification of the
digital financial services offer (notably by non-banking
providers) and financial innovation (Fintech) (with a
concerted effort between all actors).
Favor the development of digital platforms
to expand civil services and e-government. Improving coordination in the development of
cross-border digital platforms across several admin-
istrations and government agencies is necessary.
This improved coordination should be combined
with the acceleration of the implementation of the
regulatory and institutional framework of interoper-
ability (connected-Gov) between different govern-
ment agencies. The ultimate goal is to facilitate the
development of online public services. Finally, in the
medium term, it is important to improve citizen confi-
dence in the payment of transactions through digital
platforms, drawing on international best practices in
this area.
Promote digital entrepreneurship and re-
search and development (R&D) in digital arenas
to promote innovation and efficiency. In the short
term, it is recommended to promote international
cooperation and partnership agreements between
Tunisian research laboratories and international
SPECiAl FOCuS: ASSESSMENT OF THE DiGiTAl TRANSiTiON iN TuNiSiA 23
laboratories, in the private and public sectors, in terms
of R&D in the fields of digital technology. As with the
previous recommendations, this first initiative should
be reinforced by structural actions such as the
development of public-private cooperation in R&D
through the establishment of interfacing mechanisms,
as well as strengthening a supportive ecosystem for
technology start-ups.
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