Following a sharp decline in 2020, GDP is projected to expand at an annual rate of 3 to 3¼ per cent in 2021 and 2022. After a strong rebound in the third quarter of 2020, the tightening of containment measures due to rising infections has particularly affected labour-intensive services sectors. High unemployment will weigh on household incomes, damping private consumption. Investor confidence remains subdued due to little progress on structural reforms and uncertainty related to the financing of the high fiscal deficit. The gradual removal of containment measures in Tunisia’s main trading partners will boost merchandise exports, but persisting health risks will continue to weigh on tourism activity and job creation until vaccination becomes widely deployed domestically and in main trading partners.
Monetary policy should remain accommodative if inflation continues to be moderate. Improvements in public spending efficiency − including a reform of public employment and state-owned enterprises, the phasing-out of regressive energy subsidies, a reduction of tax exemptions and an improvement of tax enforcement − would create fiscal space for better-targeted support to vulnerable households and public investments in infrastructure, education and health. Lowering administrative burdens on firm entry and growth as well as trade barriers for onshore firms would strengthen competition and innovation, and boost investment and formal job creation.