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.


  • Support from international donors, including the IMF, through an Extended Fund Facility (EFF) program
  • Economy in the process of diversifying
  • Close to the European market; association agreement with the EU
  • Tourism potential
  • Natural resources, including phosphates and hydrocarbons


  • High social and geographical inequalities
  • High unemployment rate, mainly among young people
  • Tourism sector facing political and security problems as well as increased competition
  • Social tension leading to increased demonstrations and social unrest
  • Porous border with Libya, which is a source of insecurity
  • Structural imbalances in public and external accounts; significant increase in external debt, which represents about 75% of total public debt

Current Trends

A timid upturn in growth

After being hurt in 2019 by a slowdown in the manufacturing sector, partly due to less favorable external demand, growth is expected to strengthen slightly in 2020. It will be mainly supported by agriculture, tourism and the start of operations at the Nawara gas field. However, there will still be many constraints. Measures to contain the budget deficit are expected to affect the contributions from public consumption and investment. In addition, greater control of public spending or tax increases could hamper household incomes, squeezing the contribution from private consumption, despite a relative easing of inflationary pressures. With the presidential and legislative elections over, private investment could accelerate. Nevertheless, growth is expected to remain hesitant in view of uncertain domestic and external demand. The record production of olive oil expected in 2019/2020 should support exports, but the slowdown in Europe will affect demand for manufactured goods, including mechanical and electrical appliances and clothing. The European slowdown could also impact the recovery of tourism. While these factors will affect the contribution from foreign trade, it will remain positive thanks to a more contained increase in imports, mainly due to the reduction in the energy import bill as the Nawara field comes onstream.
The restrictive monetary policy and oil price developments should allow disinflation to continue gradually.

Persistent pressures on the balance of payments

After slowing in the election year, the consolidation of public finances undertaken as part of the IMF Extended Fund Facility (EFF) program is expected to be more pronounced in 2020. Efforts will focus in particular on increasing revenue, through tax administration measures to improve collection and tax fraud prevention. On the expenditure side, after the previous government granted a wage increase in February 2019, new civil service hiring is expected to be limited in 2020, in order to contain the growth in the state wage bill, which represents about 15% of GDP. Subsidy expenses, particularly for energy, could be trimmed. Development spending is expected to remain constrained, in particular by the increase in external debt service. Public debt, although essentially concessional (nearly 50% of the total) and characterized by long maturities, remains vulnerable to a depreciation of the dinar, since nearly 75% is denominated in foreign currencies. Funding from international donors is likely to remain necessary to finance the deficit.

In 2020, the current account is expected to continue to show a large deficit, owing to the substantial trade shortfall. However, it could shrink slightly thanks to the reduction in the import bill, particularly in energy after the start of operations at the Nawara gas field. After a decent tourism season in 2019, which supported a reduction in the current account deficit, growth in tourism earnings and the services surplus is expected to be lower in 2020, given sluggish European growth. Higher interest payments on debt are expected to reduce the income surplus, while the surplus in transfers, fuelled by expatriate workers’ remittances, may be affected by less favorable global conditions. The large current account deficit is expected to remain primarily financed by external debt and will keep foreign exchange reserves (about 3 months of imports) and the Tunisian dinar under pressure.

A fragmented political landscape in the face of social and security challenges

Persistent social tensions fuelled by high unemployment and low living standards left their mark on the 2019 presidential and parliamentary elections, which disrupted the political landscape established following the adoption of the country’s constitution in 2014. The presidential election held following the death of President Beji Caid Essebsi was won by Kais Saied, an independent and political newcomer who took nearly 73% of the votes in the second round. With no program, he structured his campaign around a project of participatory democracy. The legislative elections, meanwhile, produced a fragmented Parliament with the winner, moderate Islamist party Ennahda, taking only 52 of the 217 seats, ahead of Qalb Tounes, the party of Nabil Karoui, who was defeated in the second round of the presidential election. Nidaa Tounes, which won the 2014 elections with 86 seats, took just 3 seats, paying the price for the split that led to the creation of the Tahya Tounes Party by former Prime Minister Youssef Chahed. In this fragmented landscape, Prime Minister Habib Jemli, a member of Ennahda, must contend with high expectations for progress in raising living standards, which have not improved over the past decade, while also dealing with the risk of terrorist attacks. In June 2019, a double attack on Tunis, which was claimed by the Islamic State, testified to the persistent security risk.


Coface (02/2020)