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.


  • Fully democratic system with freedom of expression
  • Increasing integration of women in political and economic
  • Governance positions
  • Support from international, multilateral, European and Arab donors
  • Economy in the process of diversification
  • Proximity to the European market and association agreement with the EU
  • Tourism potential
  • Natural resources (phosphates and hydrocarbons in particular)


  • High social and geographical inequalities, high unemployment, especially among young people, leading to increased social unrest and demonstrations.
  • Structural imbalance in the public accounts (public enterprises in deficit, wages = 60% of primary expenditure, high weight of subsidies) and yet deficient public services
  • Economy strongly impacted by the COVID-19 crisis
  • Fragmentation of political representation reflecting that of society and learning about democracy
  • Tourism confronted with security problems, increased foreign competition, lack of investment, and little diversified in both range and themes.
  • Porous border with Libya, source of insecurity

Current Trends

A fragile recovery that will not erase the crisis

The COVID-19 crisis, through its internal and external lockdown measures, as well as the fall in European demand, hit an already anemic economy hard, dragging it into a deep recession. 2021 is expected to bring a significant recovery, but not commensurate with the fall in activity recorded the previous year. Household consumption (70% of GDP), already weak, has been badly affected by rising unemployment and falling incomes. It should pick up modestly in 2021. Similarly for commercial services (nearly 50% of GDP), with tourism at the forefront. The 60% drop in 2020 in its revenues, which contribute 14% to GDP and employment, should only be marginally erased, which will depend, in any case, on the control of the pandemic. Accommodation and catering, but also transport and crafts, will therefore continue to suffer. The manufacturing industries (16% of GDP), in particular textiles, clothing, and automobile and aeronautical parts, should grow in line with European demand. On the other hand, the other industries (hydrocarbons, phosphates and derived fertilizers, plaster) could still suffer from strikes and blockages, as was the case in 2020 when oil and gas production fell by 8%. However, rising oil prices and the firmness of fertilizer prices will be good for export earnings. More broadly, exports, which have moved from 50% to around 40% of GDP between 2019 and 2020, will, above all, have to improve for goods, even though the reopening of the border with Libya in November 2020 will have a favorable impact on tourism, especially medical tourism. Faced with this mixed recovery, investment (15% of GDP), which fell sharply in 2020, will only timidly resume. Agriculture (12% of GDP), which has been affected by unfavorable weather conditions and an erratic supply of fertilizers, should show an increase. Olive oil exports, one of the rare sectors not to have experienced the crisis, will continue to prosper.


Fiscal consolidation postponed

Fiscal consolidation, which was well advanced at the end of 2019 under the IMF's Extended Credit Facility, whose four-year term expired in May 2020, reversed in 2020 with the onset of the crisis. While revenues fell by about 20%, expenditure increased by 10% despite cuts in non-essential spending. The deficit widened significantly, requiring the increased involvement of multilateral and European partners, alongside increased recourse to the domestic market and central bank financing. In 2021, the deficit is expected to decline only slightly, as some revenues will be delayed by the crisis, while some aid will need to be extended and some spending, such as payments to suppliers and arrears to public enterprises, can no longer be postponed. The financing requirement, including the deficit and debt amortization (27% of GDP), should be covered overwhelmingly by external sources, reflecting a debt at 67% external and 71% in foreign currency (September 2020). There is also talk of a national loan and an appeal to expatriates.

The ratio of the current account deficit to GDP continued to fall in 2020, despite the fall in GDP. This is because imports, linked to domestic demand, have fallen more than exports of goods, allowing the trade deficit to be reduced from 14 to 10% of GDP. However, the surplus in services linked to tourism (3% of GDP in 2019) has vanished. Concomitantly, remittances from expatriates (5%) have held up fairly well and dividend and interest payments to foreign investors (2%) have varied little. The current account balance should change little in 2021. While exports of goods are expected to recover faster than imports (energy, which constitutes a third of them, will fall by 20% with the increased output from the Nawara gas field), tourism receipts will be anemic and the interest on the debt will increase slightly. The inadequacy of foreign investment (between 1 and 2% of GDP) is forcing the State to go into debt, with overlapping public and external financing needs. Foreign exchange reserves approached the equivalent of 5 months of imports at the end of 2020. Despite the (effective) interventions of the Central Bank to strengthen the dinar, they have held up well thanks to external aid. In 2021, fewer interventions are expected and the erosion of the exchange rate will resume.


Political and social tension

The political scene remains turbulent. The government of Prime Minister Hichem Mechichi, an independent who took office in September 2020, is the third since the October 2019 elections. Government instability reflects both political fragmentation and the opposition between the secularists and clerics (represented by Ennahdha, the conservative Islamist party, which holds 52 seats out of 217) in the Assembly of the Representatives of the People, which requires majority votes. Added to the quarrels between President Kaïs Saïed, the prime minister, and the Assembly, this complicates the handling of the economic and social problems, and the persistent and acute public service deficiencies in the governorate of Tataouine (unemployment > 30%, but 40% of Tunisia’s oil and 20% of its gas) in the south of the country, and the breeding ground for numerous strikes, blockades of industrial sites, and terrorist acts. Under these conditions, the restoration of public accounts, probably with the conclusion of a new agreement with the IMF and tied foreign aid, will be difficult. Early elections in 2021 are a possibility.


Coface (02/2020)