Tunisia's economy has emerged from rigid state control and is now mostly liberalized. World Bank and International Monetary Fund (IMF) support, coupled with prudent economic policies implemented by the Tunisian Government in the mid-eighties after a balance of payments crisis, has resulted in stable growth. Although this faltered after September 11, 2001, the economy has since bounced back, thanks to healthy exports, renewed growth in tourism, and favorable climatic conditions which boosted agricultural production.
Manufacturing industries, producing largely for export, are a major source of foreign currency revenue. Industrial production represents about 28.3% of GDP. It primarily consists of petroleum, mining (particularly phosphates), textiles, footwear, food processing, and electrical and mechanical manufactures. Textiles are a major source of foreign currency revenue, with more than 90% of production being exported. While the end of the Multifiber Arrangement in 2005 eroded Tunisia's competitiveness in its traditional European textile markets, manufacturers upgraded product lines and have been exporting smaller quantities of higher value items. In addition, the Government of Tunisia has implemented a national program to support and upgrade the textile/clothing sector. The first three years of the program, covering the period 2005-2007, produced encouraging results as local industries moved toward higher quality, value-added goods and shifted from the subcontracting activities to co-production. The Government of Tunisia has launched a second three-year program for the period 2008-2010, which seeks to strengthen integration, boost competitiveness and develop distribution networks abroad. The overall cost of this program is about TND 19 million (U.S. $15.6 million), of which TND 7.3 million (roughly U.S. $6 million) is financed by the European Community in the context of the Industrial Modernization Program (PMI).
Tourism is a major source of foreign exchange, representing about 20% of hard currency receipts ($2.745 billion), as well as an important sector for employment. In 2008, 7 million tourists visited Tunisia, hailing largely from Europe and North Africa. While the influx of tourists represents a boon to the economy. Tunisia's large expatriate population (about 1 million) also makes a positive and significant contribution. In 2008, remittances from abroad reached 2.4 billion dinars (approximately $1.97 billion), or roughly 4.71% of Tunisia’s GDP and 20.5% of the country’s foreign currency earnings (TND 11.687 billion, or U.S. $9.583 billion).
Soaring oil prices in 2008 hit the Tunisian economy hard. The country is a net importer of hydrocarbon products. Domestic crude production is 95,000 barrels per day, but refining capacity is only 34,000 barrels a day. Proven reserves are in the region of 400 million barrels. Tunisia has one oil refinery on the north coast in Bizerte and in May 2006 awarded a tender to Qatar Petroleum for a second at La Skhira, near Gabes. Natural gas production is currently about 3 million tons oil equivalent. Proven reserves are about 2.3 trillion cubic feet, two-thirds of which are located offshore.
Economically and commercially, Tunisia is very closely linked to Europe. Tunisia signed an Association Agreement with the European Union (EU), which went into effect on January 1, 2008. The agreement eliminates customs tariffs and other trade barriers on manufactured goods. To help prepare the Tunisian economy for this opening, the Tunisian Government embarked on an industrial upgrading program, called "Mise a Niveau." The goal of the program was to improve the competitiveness of Tunisian industry. Launched in 1996, the program, supported in part by EU grants, consisted of technical assistance, training, subsidies, and infrastructure upgrades aimed at encouraging and assisting Tunisian private sector restructuring and modernization.
In 1987 the Government of Tunisia began a privatization campaign through which EU member states became the primary providers of foreign direct investment (FDI). In 2008, the privatization program raised TND 302 million ($247.64 million). Investments from the United Arab Emirates are reported to have exceeded $20 billion during the last two years, but government accounting requirements exclude the amount from reported figures. In 2008 flows of EU investment reached TND 2.270 billion ($1.861 billion). In the same year the Turkish holding company Tepe Akfen Ventisres (TAV), which is building a new international airport in Enfidha, was ranked the top foreign investor with TND 188.9 million (roughly $155 million).
The United States and Tunisia signed a Trade and Investment Framework Agreement (TIFA) in October 2002 and follow-up TIFA Council meetings were held in October 2003, June 2005, and March 2008. Although TIFAs can serve as precursor agreements leading to bilateral Free Trade Agreements (FTAs), little progress has been made toward generating the necessary reforms required to engender an FTA. In 2004, Tunisia signed the framework agreement for a multilateral trade agreement with Egypt, Jordan, and Morocco, known as the Agadir Agreement. The Agadir Agreement creates a potential market of over 100 million people across North Africa and into the Middle East.
The government still retains control over certain "strategic" sectors of the economy (finance, hydrocarbons, aviation, electricity and gas distribution, and water resources) but the private sector is playing an increasingly important role. Despite this, Tunisia is a founding member of the World Trade Organization (WTO) and is publicly committed to a free trade regime and export-led growth. Most goods can be imported without prior licensing, although non-tariff administrative barriers sometimes delay imports of goods. Significant import duties, coupled with high consumption taxes on certain items and a value-added tax (VAT), add considerably to the local price of imported goods.
The Government of Tunisia is beginning to take a more proactive stance on intellectual property rights (IPR) enforcement and education. Tunisia's recent intellectual property rights law is designed to meet WTO TRIPS (Trade-Related Aspects of Intellectual Property) minimum standards and there is on-going collaboration between the United States and Tunisian governments to promote public awareness of these rights.
Tunisia's timely completion of its IMF program (1987-1994) and subsequent fiscal conservatism have earned it investment grade ratings from a number of international institutions, although Standard and Poor has noted that ratings on Tunisia are constrained by its highly centralized political system and the need for further structural reforms. Tunisia issued 11 borrowing operations on the international market--7 on the Japanese market (Samurai bonds), 2 on the U.S. (Yankee bonds), and 2 on the EU (Euro-dollar bonds). The last operation was a 30 billion yen ($253 million) Samurai borrowing, with 20-year maturity, issued on August 1, 2007.
The Central Bank is moving from direct management of the financial sector towards a more traditional supervisory and regulatory role. Commercial banks are permitted to participate in the forward foreign exchange market. The dinar is convertible for current account transactions but some convertible dinar/foreign exchange account transactions still require Central Bank authorization. Total convertibility of the Tunisian dinar is probably still some years away. The dinar is traded on an intra-bank market. Trading operates around a managed float established by the Central Bank (based upon a basket of the Euro, the U.S. dollar and the Japanese yen). The stock exchange remains under the supervision of the state-run financial market council, and lists 51 companies according to 2008 figures. In December 20007 the Government of Tunisia created a small-cap exchange, with the aim of boosting investment. The new market’s financial reporting and profitability requirements are less onerous than those in the main stock market.
Tunisia has a relatively well-developed infrastructure that includes six commercial seaports and six international airports. The contract to build a seventh international airport at Enfidha was awarded to TAV, a Turkish holding company, in March 2007. A tender Build Operate and Transfer (BOT) for the deep water port at Enfidha is also expected. A call for interest in this port project was issued in December 2007.
Average annual income per capita in Tunisia is over $4,022. On May 2, 2008, the minimum monthly legal wage for a 48-hour week was raised to TND 251.880 ($206.554) and for 40 hours to TND 217.880 ($178.66).
While Tunisia’s growth rate has averaged 5% over the past decade, its development goals require an average 6%-7% growth rate. In 2008, real GDP growth was 5.1% and inflation reached 5%, up from 3.2% the previous year. According to official figures, Tunisia has 14.1% unemployment, but it is generally believed to be much higher in some regions. Despite the present low rate of population growth, a demographic peak is now hitting higher education and the job market. Tunisia has invested heavily in education and the number of students enrolled at university has soared from 41,000 in 1986 to over 335,649 in 2008. Providing jobs for these highly educated people represents a major challenge for the Government of Tunisia.
Information by U.S. Department of State