A slow post-COVID economic recovery and delays in implementing key reforms, including on subsidies, risk further straining already strained public finances and widening fiscal and trade deficits, according to the latest Bulletin. of the World Bank’s economic outlook devoted to Tunisia.
Published in French under the title Managing the crisis in times of uncertainty, the report anticipates a growth rate of 2.7% for 2022, mainly due to the recovery of tourism and trade, combined with the good performance of the sectors mining and manufacturing industry. This figure is slightly lower than the World Bank’s previous forecasts, which reflects the impact of the war in Ukraine on the Tunisian economy. Economic activity in 2022 will therefore remain well below its pre-COVID levels, the World Bank said in a statement on Wednesday, September 07.
“Just as its economy began to recover from the COVID-19 crisis, Tunisia faced the twin challenges of rising commodity prices and the war in Ukraine, which caused very strong tensions over global wheat and energy supplies, says Alexandre Arrobbio, World Bank operations manager for Tunisia. Aware of these unprecedented difficulties, the World Bank granted, at the end of June, a loan of 130 million dollars to Tunisia in order to mitigate the repercussions of the war in Ukraine on food security. This financing will enable the government to finance its grain purchases while undertaking the announced reforms.”
The first chapter of the report shows how the war in Ukraine and the rise in world prices for commodities and manufactured goods have exacerbated the vulnerabilities of the Tunisian economy during the first months of 2022. The inflation rate has increased by 6 .7 to 8.1% between January and June 2022, which prompted the central bank to raise its key rate for the first time since 2020. The trade deficit widened by 56% during the first half of 2022, to stand at 8.1% of GDP, while the budget deficit should reach 9.1%, against 7.4% in 2021, under the weight of the increase in energy and food subsidies.
The system of food subsidies, which constitutes one of the main factors of the rise in trade and budget deficits, is more particularly dealt with in the second chapter. The report shows that, in the case of wheat, the subsidy system has indeed served to ensure price stability for the benefit of consumers, but that it has also had the effect of putting considerable pressure on the finances of the state, penalizing farmers and food processors, and lead to overconsumption, leading to significant losses and waste. Rather than subsidizing food prices, the report recommends paying compensatory monetary allowances to vulnerable households, which would improve the efficiency of the system,
