Jean R. AbiNader
March 12, 2019
Tunisia struggles to have better economic outcomes in 2019, gains support from the international community. Across the board, most indicators are favorable for 2019 according to information compiled in a recent Oxford Business Group report. Although the Tunisia dinar fell some 22% against the dollar this past year, Tunisia’s 2018 exports rose 19% to $13.4 billion while imports rose some 20% to $19.6 billion, resulting in a jump in the trade deficit due largely to rising energy costs and the weakening dinar. Bright spots continue to be agricultural and processed agricultural products, which showed an increase of more than 53% last year, while manufacturing exports rose 25% according to the government.
Challenges continue in terms of taming inflation, now at 7.1%, and unemployment that stayed at 15% throughout last year. How Tunisia will succeed in combatting inflationary pressures in light of recent increases in the salaries of public sector workers and rising living costs will affect the country’s capacity to meet IMF commitments to reduce public spending, especially on salaries. However, as the report noted, “Despite concerns over Tunisia’s ability to rein in public spending, curb inflation, and reduce the deficit, foreign investors have continued to increase their participation in the economy.”
Foreign direct investment (FDI) increased by 28.6% in 2018 led by investments in the agricultural and industrial sectors. International organizations are also playing a key role. The EU recently announced that it would provide more than $342 million to support economic development and reducing youth unemployment. This follows an agreement from Saudi Arabia to provide a loan $500 million to alleviate pressure on the budget, as well as $230 million to finance exports and an additional $100 million for projects. The latter agreements were cemented during visits last year by Crown Prince Mohammed bin Salman to Tunisia followed by a visit to Riyadh by Tunisian Prime Minister Youssef Chahed.
The International Islamic Trade Finance Corporation will provide a loan of $154 million to help offset energy imports and provide capital to the Tunisian Electricity and Gas Company. This is in addition to a $120 million loan from the African Development Bank to support budget payments. With a more positive outlook for 2019, Tunisia should be able to reach a GDP growth of 2.9% this year with an eye on increasing agricultural exports and attracting more FDI.
Algeria continues to roil with uncertainty with postponement of April presidential election. It is hard to find news summaries of events on North Africa without some commentary and analysis on the postponed April Presidential election. The announcement early this week that President Bouteflika would not run, and the election postponed so that a broad consensus about going forward could be achieved is still settling in. Demonstrations that occurred opposing his candidacy shared four points : they were uncharacteristic – not the usual “not happy with economic or social conditions” small gatherings that are a common feature of Algeria life; they all focused on resistance to President Bouteflika standing for a fifth term; the demonstrators pointed to both Bouteflika’s and the complicity of the regime (business, political, and military elites) as the problem, which is still in place; and there were no solutions proposed other than opposing the re-election as a sham to maintain the existing power structure. Another common theme was that the current process is a charade that deprives the Algerian people of their dignity and deprives the country of drastic measures needed to curtail corruption and push economic and social reforms. Now, has that changed?
Since the announcement was vague about next steps, there are many unanswered questions, and taken in conjunction with the news that the Prime Minister Ahmed Ouyahia resigned his office, to be replaced by the Interior Minister Noureddine Bedoui, there may be some disarray among the elites. The announcement from the Algerian Press Service mentioned that “This new Republic and this new system will be in the hands of the new generations of Algerians who will naturally be the main actors and beneficiaries of public life and sustainable development in the Algeria of tomorrow.”
The statement went on, “Second, there will be no presidential election on April 18. This is to satisfy a pressing request that many of you have addressed to me to remove any misunderstanding as to the desirability and irreversibility of the generational transmission to which I am committed.” What this means in concrete terms is yet to emerge. One suggestion is to suspend the current government and for a military or a caretaker government to initiate a minimum of reforms to begin a process of economic growth, although this may be far-fetched as it would involve many who are part of the twin problem of corruption and economic stagnation. A third option is that the EU and the US work to develop a coordinated strategy to both influence the power brokers in Algeria and close off opportunities for Russia and China to increase their already sizeable influence in the country. Given the current low priority of Algeria on the US administration’s radar and the disarray in the EU, this may end up being too little too late.