Poor economy & continuing inflation

market

Tunisia’s economic crisis is almost 3 years after the revolution still continuing, if not worsening. The inflation rate was according to statistics 6.2% last July, whereas the estimation is that the average annual rate of 2013 will be somewhere between 5.5 and 6%. It doesnt take alot to imagine what consequences this has for the average Tunisian. According to government statistics and recent news articles especially food and rent prices have increased, in September this year by 7.7%. One should take into consideration that last year it was the same, if not worse. According to analysists next year will also be for sure troubling for Tunisians with at least the same rates.

Practical examples of the consequences are numerous. Ask any Tunisian about prices that have increased compared to two or three years ago and they will complain about price increases in the most basic needs such as rent, vegetables, milk or petrol. A Tunisian going to the local market nowadays will have to pay atleast twice as much for a kilo of green peppers (inevitable for many Tunisian dishes) compared to just two years ago. Translated to European standards this would mean a kilo of green peppers would increase in just two years from €1,5 to become €3.

Despite that Tunisia’s economy is also struggling with a big external deficit, made worse by a big fall in tourism revenues since the uprising in January 2011 that led to the fall of former president Ben Ali’s regime. The continuing instability and national security problems are a huge barrier to getting the economy and tourist industry back on track, not to mention attracting foreign investments. According to statements by officials the 2014 Financial Draft Law – recently announced – that calls for raising taxes and cutting subsidies to reduce the country’s budget deficit has led to wide criticism. Earlier this year the government agreed with the International Monetary Fund (IMF) upon a loan of 1.75 billion dollar. Conditions of the loan being that the government will gradually cut subsidies on energy, electricty, petrol, milk, sugar, bread etc.

Decreasing middle class

middle class

For decades it was according to analysts the Tunisian middle class that gave the country a certain degree of stability. In early 2011 approximately 89% of the Tunisians belonged to the middle class, putting the country ahead of all African countries. However the last five to eight years before the 2011 revolution the middle class already started to suffer and inequality increased. Especially along regional lines. Since the revolution however the middle class has shrunk to approximately 69%. Most of them became part of the increasing lower middle class, which has grown significantly and is expected to continue to due to the poor economic state of the country and increasing inequality. The step from the lower middle class to below poverty line is a small one. While reading this one should imagine that an “above average” salary in Tunisia is 650 dinars a month (€290). Whereas in many cases people earn a salary of 400 to 550 dinars, even less than just mentioned.

Although the coastal cities have experienced immense development throughout the last decades, rural Western and Southern Tunisia have consistently been neglected by the government. Despite the fact that this divide is typical for many developing countries it is not a surprise that the first demonstrations in the beginning of the revolution started in impoverished southern Tunisian cities, soon spreading to the West. Impoverished cities such as Sidi Bouzid (Southern Tunisia and birth place of the revolution) or Kassrine (West Tunisia) played an important role in the uprising against the 23-year rule of the former president.

Due to the tight economic grip the ruling Ben Ali-Trabelsi family had on the country’s economy and its private sector, often by blackmailing businesses that were making a good profit, it was itself the cause of not being able to keep up in providing new jobs to many young well-educated Tunisians. There is a reason wikileaks cables described the former ruling family as “quasi-mafia” and “an oblique mention of The Family is enough to indicate which family you mean”. Moreover the former regime has throughout its rule never been able – or did not try – to develop the impoverished south or west. Meaning that even in times of sometimes strong and exemplary economic growth the money was often “trickling down” to the same persons and always to the same regions; coastal Tunisia and especially Greater Tunis area including Bizerte, the touristic Gulf from Hammamet to Sousse and Mahdia, as well as the port city of Sfax.

The way forward

private sector

As Tunisia removes away from its former regime it is of crucial importance that its private sector is stimulated to grow. Because of the tight grip of the former regime small and medium-sized businesses (SMB) have never had the chance to find their way in Tunisia. Government representatives, civil society and especially the private sector have been active in discussing together idea’s for policy making on how to stimulate the private sector. However, much more is needed from policy makers to ensure creating a climate where the competitive private sector and SMB’s become the driving force in creating jobs and strengthening Tunisia’s economy.

Apart from that applying the law in cases of fraud, tax evation or corruption should be a priority of any future government. A thriving private sector and foreign investors will take a look at Tunisia and the guarantees they have that the rule of law is equally applied to all businesses. In some cases restrictions on foreign investment for example should be reviewed. One example is the fact that in many sectors such as trading entry is reserved for enterprises with Tunisians holding majority interests. Meaning the foreign investor will have to find a Tunisian that owns at least 51% of the company….which will obviously put the investor of. For several other services activities foreign investment requires prior agreement from Tunisia’s Investment Commission if foreign ownership exceeds 50 percent.

Apart from economic policy making there is still the fact that the poor economic state of Tunisia is directly related to the instability that is caused national security problems such as terrorism or the political crisis that has swept the country for months now. All of this makes ordinary citizens wonder what they have actually gained from the revolution so far. With increasing inflation and prices, a middle class that continues to suffer and a never ending political crisis many Tunisians are very pessimistic about the future.

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