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Quick Facts
- Population:
- GDP (PPP):
- $130.6 billion
- 0.8% growth
- 2.1% 5-year compound annual growth
- $11,634 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
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Tunisia’s economic freedom score is 58.9, making its economy the 99th freest in the 2018 Index. Its overall score has increased by 3.2 points, with significant improvements in trade freedom, investment freedom, and fiscal health outpacing a lower score for the labor freedom indicator. Tunisia is ranked 10th among 14 countries in the Middle East and North Africa region, and its overall score is below the regional and world averages.
To generate more jobs for its youthful population, the government hopes to boost growth in Tunisia by making fiscal and monetary reforms, floating the exchange rate, cutting the fiscal deficit, reducing the bloated bureaucracy, reducing subsidies, restructuring loss-making state enterprises, and reining in public-sector debt. Other institutional weaknesses, left unaddressed by political instability, include a burdensome regulatory regime and rigid labor markets. Many of the market-oriented reforms are opposed by political parties and trade unions that espouse statism.
Background
Tunisia is the birthplace of the Arab Spring. Longtime President Zine al-Abidine Ben Ali was ousted in 2011, and the Islamist Ennahda Party later won the largest number of seats in the National Constituent Assembly. Following ratification of a new constitution in January 2014, an interim technocratic government ruled until Tunisia’s first full parliamentary and presidential elections. Nidaa Tounes party leader and former Prime Minister Beji Caid Essebsi was elected president in 2015. Despite notable progress in democratization and ongoing reform efforts, Tunisia’s transformation to a more market-oriented economy has been gradual. Key exports include textiles and apparel, food products, petroleum products, chemicals, and phosphates, with about 80 percent of exports bound for Tunisia’s main economic partner, the European Union.
The protection of property rights continues to be an area of concern, closely linked to high levels of corruption as well as to a large backlog of property disputes. Although the judiciary is generally independent, governmental weakness has encouraged graft at lower levels of bureaucracy and law enforcement. In 2017, Tunisia declared a “war on corruption.”
The top personal income tax rate is 35 percent, and the top corporate tax rate is 30 percent. Other taxes include value-added and property transfer taxes. The overall tax burden equals 24.0 percent of total domestic income. Over the past three years, government spending has amounted to 28.6 percent of total output (GDP), and budget deficits have averaged 4.4 percent of GDP. Public debt is equivalent to 60.6 percent of GDP.
A relatively efficient business system suffers from a lack of transparency and inconsistent implementation. Tunisia has developed its industrial sector and has created low-skilled employment, but the unemployment rate among university graduates is estimated to be more than 30 percent. The government continues to phase out fuel subsidies and has eliminated sugar subsidies.
Trade is significant for Tunisia’s economy; the combined value of exports and imports equals 91 percent of GDP. The average applied tariff rate is 3.9 percent. Nontariff barriers impede some trade. Government openness to foreign investment is below average. Despite ongoing reform efforts, the weak financial sector is fragmented and dominated by the state. Access to credit remains limited, and capital markets are underdeveloped.