World Bank Lowers Growth Forecast for Tunisia

Women shop at Sidi Bahri market in Tunis, Tunisia (File photo: Reuters)
Women shop at Sidi Bahri market in Tunis, Tunisia (File photo: Reuters)
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World Bank Lowers Growth Forecast for Tunisia

Women shop at Sidi Bahri market in Tunis, Tunisia (File photo: Reuters)
Women shop at Sidi Bahri market in Tunis, Tunisia (File photo: Reuters)

The World Bank has just revised its growth forecasts downwards for Tunisia, dropping it from a previous forecast of 3.5 percent to 3 percent in 2022.

The report prepared by the bank, entitled "Forecasting Growth in The Middle East and North Africa in Times of Uncertainty," indicated that Tunisia's economic prospects remain uncertain, especially that the economic resilience in 2021 was moderate, and that concerns related to debt repayment remain strong due to budget deficit and high financing needs.

The bank highlighted that the modest growth is due to the economy's close link to tourism, tight budget margins, challenging business climate, and restrictions on investment and competition.

The report pointed out that Tunisia is a supplier of energy and grain and remains vulnerable to increasing international raw materials prices due to extreme uncertainty, such as the current war in Ukraine.

Tunisia is facing challenges in maintaining its food subsidies.

"Rising oil prices could delay reforms, however, as subsidies might rise with global food and energy prices," according to the report.

The World Bank noted that the growth rate in Tunisia would achieve gains, but it remains modest in light of "the structural volatility," the economic situation, the repercussions and the uncertainty of the war in Ukraine, and the sanctions associated with it.

The bank expected the inflation rate to reach 6.5 percent in 2022 and 2023 and the poverty rate to reach 3.4 percent in 2022 and drop to 3.1 percent in 2023.

Tunisian expert Ezzedine Saidan believes the figures and indicators are optimistic, noting that the local economy is still under solid shock at energy and grain prices, which Tunisia depends on for supply.

Saidan warned that if commodity prices continue to rise, the cost will double on the local economy, and such results may not be achieved again.

The Ministry of Finance predicted a medium growth rate in the coming years, announcing in a February report that the growth rate will reach 2.5 percent in 2023 and 2024, then three percent in 2025 and 2026.

The Ministry indicated its adherence to reducing the budget deficit, adding that wages should be dropped to 14.4 percent of the gross domestic product in 2024 compared to 16.4 percent in 2020.

Subsidy expenditure should decrease from 3.8 percent of GDP in 2020 to 2.1 percent in 2024.

The government aims to gradually reduce its budget deficit by 2026 from 8.9 percent of GDP in 2020 to 6.2 percent in 2022 and 2023, then 5.3 percent in 2024.



Japan’s Ishiba Heads to G7 to Press Trump to Drop Auto Tariffs

US President Donald Trump welcomes Japanese Prime Minister Shigeru Ishiba at the White House in Washington, US, February 7, 2025. (Reuters)
US President Donald Trump welcomes Japanese Prime Minister Shigeru Ishiba at the White House in Washington, US, February 7, 2025. (Reuters)
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Japan’s Ishiba Heads to G7 to Press Trump to Drop Auto Tariffs

US President Donald Trump welcomes Japanese Prime Minister Shigeru Ishiba at the White House in Washington, US, February 7, 2025. (Reuters)
US President Donald Trump welcomes Japanese Prime Minister Shigeru Ishiba at the White House in Washington, US, February 7, 2025. (Reuters)

Japanese Prime Minister Shigeru Ishiba heads to Canada on Sunday for trade talks with US President Donald Trump, hoping to persuade him to drop trade tariffs that have imperiled Japan's auto companies and threaten to undermine his fragile government.

The two are expected to meet on the sidelines of a summit of the Group of Seven nations in Kananaskis, Alberta, for their second in-person encounter. It follows a sixth round of high-level trade talks in Washington on Friday.

Japan's top tariff negotiator, Ryosei Akazawa, said he explored the possibility of a deal in detailed meetings with US Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick.

"I will make every possible effort to reach an agreement that benefits both Japan and the United States," Ishiba told reporters before leaving Japan. The timing of his meeting with Trump was still being discussed between the two countries, he added.

The trick for Ishiba, who spoke with Trump by phone on Friday, will be to get the president to drop the 25% tariff he imposed on Japanese cars, as well as a paused 24% across-the-board levy that Trump calls a reciprocal tariff, without making concessions that could hurt the prime minister's public support at home.

Returning to Tokyo with no deal would be better politically than conceding too much, analysts say.

"If it goes badly, it could even be seen as a positive for Ishiba, standing up to Trump and standing up for his country when he's under assault," said Michael Cucek, a political science professor at Temple University in Tokyo.

Ishiba and his ruling Liberal Democratic Party face an upper house election next month that comes after a lower house loss in November that left him reliant on the support of other parties to stay in power. Another poor electoral result could bring down his government and would force Trump to reset trade talks with a new Japanese administration.

"The most important thing is that Ishiba does not cave in for a bad (auto) deal," said Joseph Kraft, a financial political analyst at Rorschach Advisory in Tokyo. "I expect there will be some kind of deal, although it could be haphazard. Trump needs some good news and I don't think he has much interest in G7 activities."

Failing to reach an agreement in Canada might not have an immediate economic impact on Japan, but tariffs that stay in place will eventually drag down growth, said Asuka Tatebayashi, senior analyst at Mizuho Bank.

"If you look at the data for car exports to the US for April, it was quite striking. The volume in dollars was down by nearly 5%, but the number of cars has increased a lot," she said.

"It means either they are only selling cheap cars or the manufacturers are absorbing the cost. I think the latter is the case and this is not very sustainable."

Tariffs could shave 0.9% off Japan's gross domestic product, Mizuho Research & Technologies estimated in a report in April.