Econostrum | Economic News in the Mediterranean

The Covid-19 crisis is undermining the Tunisian economy and exacerbating poverty

Written by Frédéric Dubessy on Monday, October 12th 2020 à 17:55 | Read 1564 times

Covid-19 has aggravated an already unsustainable economic and social crisis in Tunisia. Forced to return to restrictive health measures, the government will no longer be able to help the poorest and businesses as it did in the spring to respond to the consequences of the pandemic.

The consequences of the Covid-19 crisis on, among others, the hotel and restaurant sector and tourism (photo: F.Dubessy)
The consequences of the Covid-19 crisis on, among others, the hotel and restaurant sector and tourism (photo: F.Dubessy)
TUNISIA. As of 12 October 2020, Tunisia had 32,556 confirmed cases of Covid-19 and 478 deaths, according to figures provided by Johns Hopkins University. This country of 11.7 million inhabitants has been facing an upsurge in coronavirus deaths in recent weeks, with more than 20 deaths per day, compared to a total of 50 between March and June 2020. Government authorities are therefore tightening restrictions to limit the spread of the pandemic. 

At the beginning of October 2020, all gatherings were banned, chairs were removed from bars, and since Thursday, October 8, 2020, a curfew taking effect at 8 pm has been established in several regions, mainly that of Tunis. The government will not go so far as to resort to general confinement as when the Covid-19 arrived. The Tunisian economy, already in a very bad state before Covid-19 and since the old and recent measures, would be even more threatened.

"The first wave of the epidemic caused the loss of 165,000 jobs according to our estimates," Béchir Boujday told AFP. A member of the executive board of Utica (Tunisian Union of Industry, Commerce and Handicrafts), the country's main employers' union, he said that 40% of craft enterprises have already closed and that about 30% of SMEs are "threatened with bankruptcy".


274,500 unemployed at the end of 2020

In the first half of 2020, the unemployment rate rose from 15 to 18% according to data from the Tunisian National Institute of Statistics (INS). A recent study conducted by the government and the UN predicts that it will reach 21.6% by the end of 2020, or 274,500 unemployed. Not counting the loss of work in the informal sector which employs 44% of Tunisian workers. Mainly in agriculture, tourism, catering, trade, that is to say the four sectors most affected by the Covid-19.

A macroeconomic rating from the national financial rating agency Pronoia By Reckon (PBR Rating), published in September 2020, certifies that "to restart, the country needs an overhaul of its entire model of development and value creation. The current crisis, while exacerbating the ills from which the Tunisian economy is suffering, nevertheless offers tremendous opportunities and urgency in the implementation of restructuring plans, which Tunisia needs". The analysis is very clear: "the decade 2010-2020 is far from being a satisfaction for the Tunisian economy".

The Tunisian debt represented 66% of GDP at the end of 2019 according to the governor of the Central Bank. It stood at 82% in March 2020 with a debt of 92 billion Tunisian dinars (28.5 billion euros) according to then Prime Minister Elyes Fakhfakh.
In May 2020, Fitch Ratings evoked the threshold of 90% of GDP crossed in 2021. And PBR Rating, in September 2020, expected 85.4% (with an unemployment rate of 17.1%) in its optimistic scenario and 88.4% (unemployment rate of 19.9%) in the pessimistic one.


The new government will have to reach an agreement with the IMF

Difficult for the State, despite a 21.6% contraction of the GDP in the second quarter of 2020 according to the INS, to renew the financial aid granted in March 2020. In a total amount of 2.5 billion dinars (774 M€) -200 dinars (62 €) to the poorest families and 700 million dinars (217 M€) to companies - they were accompanied by extraordinary measures such as the postponement of the repayment of loans for low wages for six months, a postponement of the payment of taxes and social security contributions for three months for companies, the possibility for companies established in offshore areas to sell up to 50% of their production on the local market. The government had even gone so far as to grant subsidies to workers in the informal sector, as pointed out at the end of April 2020 in a study by the Association of Euro-Mediterranean Economists (EMEA).

In addition to the socio-economic crisis that has been growing since the Revolution, there are also political blockages preventing progress and the implementation of the reforms and plans necessary to accompany a boom and erase inequalities in the territory. And yet the International Monetary Fund (IMF) has demanded that a new four-year programme be initialled as a prerequisite. The resignation of Elyes Fakhfakh from the post of Prime Minister in July 2020, after only five months in office, is a perfect illustration of the time lost. A few weeks before this withdrawal, Jihad Azour, director of the IMF's Middle East and Central Asia Department said he was "ready to provide financing to Tunisia if the Tunisian government requests a new programme". This solution seems to be the only possible solution today, while the external debt was estimated in March 2020 at 60% of GDP by Elyes Fakhfakh.

At the beginning of September 2020, the Tunisian Parliament finally invested a government of technocrats to try to turn the country around. Its Prime Minister, Hichem Mechichi, the ninth since 2011 and the Revolution, then certified that he could now "move forward on economic problems, as long as he is not caught in any political tug-of-war". On 30 September 2020, during the presentation of the 2020 Supplementary Finance Law and the 2021 Finance Law, Hichem Mechichi stated that he was approaching the socio-political-economic situation through "a pragmatic approach that favours practical solutions and action, far from slogans and pompous speeches, by proceeding directly to remove all obstacles hindering the realisation of national and regional projects and investment".


The poverty map published by the INS shows the disparities between regions (map: INS)
The poverty map published by the INS shows the disparities between regions (map: INS)

Poverty concentrated in the Centre-West and North-West of the country

An Oxfam report published in early April 2020 noted that Covid-19 could set back the fight against poverty in North Africa by thirty years. Well aware of this recurring problem in Tunisia, the INS published a study at the end of September 2020, which included several poverty maps. Although the average poverty rate is 15.3%, it masks huge disparities with a median of 6.3% in the big cities, 15% in the small and medium-sized municipalities, and 26% in the rural areas.

The analysis shows a high concentration of poverty in the Centre-West and North-West of the country, mainly in the non-coastal regions. The least poor are those around Tunis such as El Menzah, La Goulette and Ariana Ville. In Greater Tunis, the average poverty rate is 6.1% and in no delegation does it exceed 15.2%. On the contrary, in the North-West, Neber, El-Rouhia and Sakiet Sidi Yousset reach 45.4%, 40.7% and 39.7% respectively. In the Centre-West these rates exceed 50% in some delegations: Hassi Ferid (53.5%), Djedeliane (53.1%) and El Ayoun (50.1%). All are located in the governorate of Kasserine.

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