Country Risk Rating

A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high. - Source: Coface

Business Climate Rating

The business environment is mediocre. The availability and the reliability of corporate financial information vary widely. Debt collection can sometimes be difficult. The institutional framework has a few troublesome weaknesses. Intercompany transactions run appreciable risks in the unstable, largely inefficient environments rated B.


  • Progressive political transition
  • IMF extended credit facility
  • Economy in the process of diversification and a fairly skilled workforce
  • Proximity of the European market and association agreement with the EU
  • Tourist potential
  • Mining production (phosphates and oil)


  • High social and geographical inequalities and informal economy (50%)
  • High unemployment rate, mainly among young people
  • Significant economic weight of agriculture
  • Tourism sector facing political and security problems and increased competition
  • Social tensions leading to the proliferation of demonstrations and social unrest, particularly in the mining sector
  • Imbalance of structural public accounts and significant increase in foreign indebtedness

Current Trends

Weak Growth in 2018

The recovery in 2017 driven mainly by the good performance of the agricultural sector and services should be consolidated in 2018. Activity was, however, negatively impacted by weak growth in the manufacturing sector and a decline in mining production. In 2018, the rise in foreign demand, supported by the expected growth of the European economies and the increase in competitiveness related to the depreciation of the dinar, is expected to favor the rise in manufacturing exports.

However, the rise in production prices could limit the growth of businesses heavily dependent on imports. Social tensions and the multiplication of strikes and social movements could, as in 2017, limit the expansion of the mining sector. The tourism and transport sectors will continue their recovery thanks to the efforts made by the authorities to improve security and the fight against the terrorism, in addition to the promotional effort generating a renewed interest in Tunisia as a tourist destination. On the domestic demand side, the increase in the general level of prices generated by the rise in VAT is likely to continue to constrain household consumption. Subsidy reform, as well as wage increases combined with dinar pressures, are prone to fuelling inflation, which is not expected to weaken in 2018.

Twin Deficits and Significant Debt

The Tunisian fiscal situation has deteriorated sharply since 2011, recording substantial fiscal deficits and a significant increase in debt. Despite the support of the International Monetary Fund, authorities are finding it increasingly difficult to implement the reforms required to consolidate public finances. The public deficit has largely exceeded the target set in the 2017 finance law driven by a notable increase in current expenditure and interest on the public debt. The financing of the budget deficit was largely provided by external resources, including 2.423 billion Tunisian dinars from Qatar and 768 million Tunisian dinars from the European Union. The government plans to reduce the public deficit below the 5% mark in 2018, but this goal is ambitious. While payroll is one of the largest budget spending items, civil servants’ salaries are expected to fall slightly in 2018. The government intends, in fact, to honor the agreement signed with the Tunisian General Labour Union (UGTT), the main central trade union of the country, by increasing wages, and to offset this increase by suspending public service recruitment, and the non-replacement of retired employees. Direct and indirect taxes are expected, however, to increase, including a 1% VAT increase. Still on the rise, the debt trajectory remains worrying, especially since foreign debt is growing. Debt service is the second budgetary spending item and the repayment of maturities with international donors weighs on the foreign exchange reserves, which corresponds to 101 days of imports in September 2017 (USD 5.385 billion), against 111 days in the previous year. The management of the exchange rate, through the interventions of the Central Bank of Tunisia, has only become more difficult. In 2017, the dinar exchange rate depreciated by 16.7% against the euro and by 4.1% against the US dollar.

The current account deficit widened in 2017. The strengthening of exports in 2017 did not lead to a contraction of the trade deficit, given the sharp acceleration of imports, energy imports in particular. The balance of services and revenues has, however, improved. Although the positive momentum for exports and tourism revenue will continue in 2018, the current account will remain largely in deficit.

A Democratic Transition That is Running Out of Steam

After more than a year in power, the coalition led by Prime Minister Youssef Chahed appointed in August 2016 continues to face multiple challenges. Despite efforts to improve the security situation, the government is struggling to meet its economic and social commitments and is still faced with a growing number of strikes and protests. This deadlock situation resulted in the dismissal of the financial and education ministers and led to Youssef Chaed reshuffling his cabinet in September 2017. He consulted with major political parties and trade unions beforehand, but it ultimately led to increased representation of the Nidaa Tounes (NT) party with the return of some figures from the old regime. Although Nidaa Tounes remains in the majority and the coalition with El Nahda is not challenged, the voices of the opposition and civil society fear a gradual return to a presidential regime. In fact, a constitutional revision was brought about by the head of state, President Beji Caid Essebsi, now 91 years old. The municipal elections that were intended to anchor the democratic process at the local level and initially planned for December 2017 have been postponed until 2018. 


Coface (01/2018)