World Bank Forecasts Tunisia's GDP Growth to Decline to 1.2% during H1/23

Tunisia's Central Bank (Reuters)
Tunisia's Central Bank (Reuters)
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World Bank Forecasts Tunisia's GDP Growth to Decline to 1.2% during H1/23

Tunisia's Central Bank (Reuters)
Tunisia's Central Bank (Reuters)

Tunisia has been facing significant economic challenges for years, exacerbated by the COVID-19 pandemic and the war in Ukraine, leading to slower economic growth, higher unemployment and inflation rates, and increased public debt.

To overcome these challenges, Tunisia began negotiations with the International Monetary Fund (IMF) to obtain a financial loan on the condition that the Tunisian government implement a program of economic and financial reforms.

Negotiations faltered after Tunisia refused to lift subsidies and sell public institutions.

Amid the ongoing economic challenges and lack of agreement with the IMF, growth in Tunisia is heading toward a slowdown.

World Bank's "Tunisia Economic Monitor – Fall 2023" report forecasted a 1.2 percent GDP growth in 2023, a significant slowdown compared to 2021/22, with a slight uptick to 3.0 percent in 2024.

According to the report, the 2024 growth forecast is subject to significant downside risks related to the evolution of the drought, the pace of structural reforms planned by the government, and financing conditions.

The first part of the report focused on the economic challenges facing Tunisia, noting that a prolonged drought in the agricultural sector led to limited growth and a slight rise in unemployment, reaching 15.6 percent in the second quarter of 2023 compared to 15.3 percent last year.

Tunisia's merchandise trade deficit declined by 39 percent in the first eight months of 2023 to TD 12.2 billion (7.5 percent of 2023 GDP), boosted by more favorable international energy and food prices.

The energy deficit widened due to a drop in domestic production despite more favorable prices, continuing to account for most of the merchandise trade deficit.

The narrowing trade deficit, the rebounding of tourism receipts (+47 percent year-on-year as of the end of August 2023), and the stable performance of remittances brought down the current account deficit.

However, Tunisia still faces challenges in securing external financing in light of an essential schedule for repaying external debt in the short term.

Public debt grew from 66.9 percent to 79.4 percent of GDP between 2017 and 2022, reflecting rising public expenditures and the deceleration of the economy during the Covid-19 crisis.

The price control system that regulates the markets of basic products is the leading cause of the increasing indebtedness of state-owned enterprises and, hence, of the current shortages.

At the same time, inflation started to moderate since the peak of February 2023 at 10.4 percent. It declined to 9.0 percent in September on the back of lower global prices and weak domestic demand.

However, inflation is still high, particularly for food at 13.9 percent, as the drought and the import compression have reduced the supply in domestic food markets. Inflation also remains well above the interest rate, even though the latter has remained stable in 2023.

- Immigration as an opportunity for economic growth

The report discussed the importance of migration for Tunisia from a development perspective. It pointed out that in recent decades, immigration has become a vital matter for Tunisians, especially those facing economic difficulties.

In the last decades, remittances have been the largest financial inflow to Tunisia, reaching 6.6 percent of GDP in 21/22.

Conversely, foreign immigration to Tunisia remains small, about 0.5 percent of the population. Since the end of 2022, Tunisia has also become an important transit country for irregular migration to Europe.

To enhance the long-term benefits of migration, Tunisia could focus on a range of policies, including matching migrants' skills with the needs of the target countries, recognizing migrants' educational and professional qualifications, and strengthening the status of regular migrants.

The report said that as its importance as a migration-receiving country is likely to increase, Tunisia can also enhance the economic benefits from immigrants while maintaining their well-being and rights.

Establishing legal pathways for workers in demand, including lower-skilled workers, would be essential to maximize the benefits of immigration for Tunisia.

World Bank's Resident Representative Alexander Arrobbio, said Tunisia's economy shows some resilience despite ongoing challenges, adding that the increase in exports in textiles, machinery, and olive oil, coupled with growing tourism exports, have helped to ease the external deficit.

Arrobio noted that strengthening competition, increasing fiscal space, and adapting to climate change are crucial to restore economic growth and build resilience to future financial and climatic shocks.

- Increased bank profits hide risks

Meanwhile, the Fitch Ratings Agency said that the banks' higher profitability in the first half of 2023 hides mounting liquidity and solvency risks.

The Agency said it does not expect profitability to improve further in 2H23-2024 due to rising impairment charges and the additional tax on bank profits announced in October 2023.

The delay in Tunisia reaching an agreement with the IMF on a $1.9 billion support package is making the government increasingly reliant on banks to fund its significant financing needs, which could weaken the latter's liquidity and increase solvency risks.

Fitch forecasts government financing needs to be about 17 percent of GDP, or about $7.7 billion, in 2024, which is high.

The weak inflow of deposits limits banks' capacity to absorb the funding gap.

It also leads to increased reliance on central bank funding through open-market operations, which accounted for 8.8 percent of sector non-equity funding at end-May 2023.

In addition, the Agency expects banks' funding costs to increase due to competition for scarce liquidity. Consistently high state financing is also crowding out private-sector lending.



Projects, Agreements Exceeding $48 Billion Expected at Cityscape Global in Riyadh

National Housing Company (NHC) CEO Mohammed Al-Buty speaks at Cityscape Global. (Asharq Al-Awsat)
National Housing Company (NHC) CEO Mohammed Al-Buty speaks at Cityscape Global. (Asharq Al-Awsat)
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Projects, Agreements Exceeding $48 Billion Expected at Cityscape Global in Riyadh

National Housing Company (NHC) CEO Mohammed Al-Buty speaks at Cityscape Global. (Asharq Al-Awsat)
National Housing Company (NHC) CEO Mohammed Al-Buty speaks at Cityscape Global. (Asharq Al-Awsat)

Saudi Arabia’s real estate sector is experiencing a surge in growth, marked by record-breaking deals expected at the second annual Cityscape Global 2024, the world’s largest real estate exhibition.

Deals at this year’s event, held in Riyadh, are anticipated to exceed SAR 180 billion ($48 billion), representing an increase of over 50% compared to the previous edition.

According to Majid Al-Hogail, Saudi Arabia’s Minister of Municipal and Rural Affairs and Housing, real estate deals in the Kingdom have reached SAR 630 billion ($168 billion) since the beginning of the year, supporting national economic growth and diversification.

Cityscape, held at the Riyadh Exhibition and Convention Center, showcases Saudi Arabia’s ongoing real estate development and serves as a central platform for innovation and investment. The event is supported by the Ministry of Municipal and Rural Affairs and Housing, the General Real Estate Authority, and the Housing Program, a key initiative under Saudi Arabia’s Vision 2030.

The number of participants doubled from last year, with over 100 local and 69 international developers taking part, underscoring the strength and global confidence in Saudi Arabia’s real estate market.

Al-Hogail highlighted that Saudi banks have significantly increased real estate financing from SAR 200 billion ($53.3 billion) in 2018 to SAR 800 billion ($213.3 billion) this year, with the market projected to reach SAR 1.3 trillion ($346 billion) by 2030. The Saudi Real Estate Refinance Company has also supported this growth, providing over SAR 37 billion ($9.8 billion) in mortgage refinancing.

In line with this expansion, the Kingdom has seen a rise in homeownership rates, which reached 63.7% at the end of 2023. Over 20 new regulatory measures have been implemented to streamline the market, and more than 60,000 real estate broker licenses have been issued.

Al-Hogail noted that the real estate sector plays a critical role, impacting over 60 economic sectors and positioning Saudi Arabia as a global hub for urban development and sustainable cities of the future.

Supporting these objectives, Cityscape hosted 400 exhibitors from 50 countries and over 100 investors, with an agenda aligned with Vision 2030’s pillars: increasing supply, expanding financing, modernizing regulations, and adopting advanced technology.

The National Housing Company (NHC), represented by CEO Mohammed Al-Buty, unveiled a new brand identity at the event, symbolizing its commitment to creating integrated urban communities that elevate quality of life.

Al-Buty emphasized the company’s role in advancing infrastructure that aligns with Vision 2030’s sustainable development goals, aiming to build vibrant, livable environments with easy access to essential services, green spaces, and commercial areas.

Several significant agreements were also announced. The NHC signed deals worth over SAR 142 billion, while Retal pledged more than SAR 14 billion for four projects in Riyadh and Al Khobar. Mohammed Al-Habib Company revealed its “Enar” residential-commercial project, valued at SAR 5 billion, while Tilal committed SAR 6 billion to a mixed-use project in Al Khobar.

Caden announced a SAR 10 billion project to develop over one million square meters, and Mountain View earmarked SAR 1.2 billion to build 500 villas. Diriyah Gate Company also invested SAR 1 billion for luxury residential and hotel suites, in partnership with brands such as Ritz-Carlton and Raffles.

With the theme “Future of Living,” this year’s Cityscape Global highlights Saudi Arabia’s dynamic real estate sector and the nation’s commitment to transforming urban landscapes and meeting future lifestyle needs.