Eurozone crisis will impact on Tunisian economy

“The economic crisis of the Euro Zone will certainly impact on the Tunisian economy and on the country’s trade with European Union (EU) countries,” said Mr. Lotfi Khedir, Director of the Foreign Trade Observatory (OCE) at the Trade and Tourism Ministry in an interview with TAP news agency. Tunisia’s trade exchanges depend at 80% on European demand while off-shore companies settled in the country, provide 20% of jobs (nearly 320,000 persons). In its report published on November 10, 2011, the European Central Bank (ECB) has already revised downward economic growth in the Eurozone for 2011, to 1.5% compared with initial estimates of 2%, which will be translated, according to Mr. Khedir, in a fall in demand on Tunisian products. The Eurozone crisis has not spared major economic partners of Tunisia whose growth rates were revised downward. These include, in particular, France, first partner of the country, whose growth rate should not exceed 1.6% by late 2011, Italy (0.5%) and Spain (0.7%). Germany expects, however, a higher growth rate of 2.9%. In this environment, growth of European exports will not exceed according to forecasts 6.1% in 2011 and 3.4% in 2012. For imports of the Eurozone, their growth is estimated at 4.8% in 2011 and 3% in 2012. Possible impact on Tunisian economy Speaking about the potential impact on trade between Tunisia and its EU partners, Mr. Khedir said that “We should expect all scenarios, “especially since intentions regarding major orders declined significantly. In parallel, European consumers, hit by the crisis, have changed their behaviour and became more “prudent”. This explains the decrease in the volume of retail sales, according to the report of the European Central Bank (November). Foreign trade results in Tunisia to October 2011 revealed a decline in the rate of growth of Tunisian exports to EU countries. The latter fell from 20.9% in the first half to 15% late October. National exports to the French market declined from 33.9% to 20.5% while those dedicated to the German market decreased from 12.5% to 10.7%. The fall was more significant on the Spanish market, where Tunisia’s sales declined from 27.3% to 4.6% Alternatives to address the crisis According to Mr. Khedir, Tunisia should look to its neighbours to cope with this crisis and minimise its impact on the economy. For this purpose, it should make better use of its geographical proximity to increase and diversify exports to Maghreb countries, particularly Libya. Tunisia should also strengthen its bonds with Sub-Saharan African countries and review its positioning strategies on these markets, he said, calling also to make the most of the General System of Preferences (GSP) adopted recently by the U.S. Congress to increase sales to the United States. The official also recommended encouraging consumption of local products to boost economic and trade activity, emphasising the need to improve the quality of national production. Mr. Khedir also called for taking more interest in strategic monitoring and market prospecting. “These steps will certainly help take best decisions at the right time,” he said.