Tunisian Economy and the challenges of democratic transition

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Moez Labidi - Professor of Economics at the University of Monastir in Tunisia
In this presentation, Moez Labidi, Professor of Economics at the University of Monastir in Tunisia, discusses the current challenges of the democratic transition in Tunisia.
GDN-AUB Panel Discussion on "The road to democracy: The Arab region, Latin America and Eastern Europe".
Beirut, Lebanon
May 18th, 2012.

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Tunisian Economy and the challenges of democratic transition

  1. 1. The Road to Democracy :the Arab Region, Latin America and Eastern Europe Beirut Friday, 18th May 2012 Tunisian Economy and the Challengesof Democratic Transition Moez LABIDI University of Monastir - Tunisia
  2. 2. 1 - Revolution outbreak main reasons2 - Tunisian economy and the « revolution choc »3 - The challenges of democratic transition in Tunisia4 - Preliminary assessment of the Tunisian economicsituation5 - Conclusion 2
  3. 3. 1 - Revolution outbreak main reasons 3
  4. 4. Technological Unemployment Goverment high levels corruptionEconomical Widespread of high tech Political Regional Human rights inequalities violation 4
  5. 5. Technological Unemployment Goverment high levels corruptionEconomical Political Regional Human rights inequalities violation Revolution Dignity - Justice - Freedom 5
  6. 6. 1 - Revolution outbreak main reasons2 - Tunisian economy and the « revolution choc » 6
  7. 7. unemploymentPolitical Fiscal revenues Banks : Non-performing loans Libye Growth InvDomestic : Wait & See Economy -2,2 % attitude Europe 2011 Inv Foreign : outflowSecurity Unemployment Fiscal revenues 7
  8. 8. Fiscal policyExpansionary spending policy Fiscal relief Bailout of busnisses Wages increase Massive public sector hiring Political uncertainty Downturn in fiscal revenues Increasing social demands Increase in budget deficit 8
  9. 9. Monetary Policy : ultra-expansionaryReserves requirements Interest rate Liquidity injection 4,5 % 12,5 % Mns TND 2% 3,5 % Political uncertainty insecurity Weak governance in the banking sector Distortion in Monetry policy Transmission mecanisms 9
  10. 10. 1 - Revolution outbreak main reasons2 - Tunisian economy and the « revolution choc »3 - The challenges of democratic transition in Tunisia 10
  11. 11. Social challenge Tunisians’ An urgent need for jobsexpectations and investment Clearer political and New economical vision perspectives gap Seek refuge in Defects in easy solution fiscal balances Current Govermentaleconomic limited resourcessituation 11
  12. 12. Pressure on bank liquidity Economy Boosting investment funding Businesses bailout Allocation of long- term resources Liquidité Shortage Central bank interventionLow Saving Purchasing power decrease rate Negative real interest rate 12
  13. 13. External financingFinancing Regional development funding projects needs International financial market External debt Multilateral / Bilateral Currency foreign investment fall reserves Current account deficit decrease 13
  14. 14. 1 - Revolution outbreak main reasons2 - Tunisian economy and the « revolution choc »3 - The challenges of democratic transition in Tunisia4 - Preliminary assessment of the Tunisian economicsituation 14
  15. 15. Satisfactory Vulnerabilities indicators % * Initial economic recovery * Assemption :Budget GDP difficult to achieve in Q1 201 :deficit Tourism (+32,8 % ); FDI(+28,3%) * European debt crises 2012 45,9 % * Sustainable level * Exchage rate depreciationPublic GDP * Acceptable debt termsDebt 2012 (Interest rate/maturity/ Currencies ) * High current account deficit 5,4 % * Core inflationary stability * Exchange rate depreciationInflation Q1 * Sharp food price increase * « Second-round effects » * Lowest « Investment grate * Acceptable rankingrating BBB - compared with regional » * Current account deficit (2,3 %) competitors * Budget deficit : 6,6 % (2012)
  16. 16. 1 - Revolution outbreak main reasons2 - Tunisian economy and the « revolution choc »3 - The challenges of democratic transition in Tunisia4 - Preliminary assessment of the Tunisian economicsituation5 - Conclusion 16
  17. 17. Economic Politicaltransition transition 17
  18. 18. New development model Revolution requirements Is the current islamist goverment able to change the developmental model ? Modernise its Stick to political speech radical speech Enlarge its popularity Shrink its popularity Starting with essential Answering populists reforms demands Switch to a new Keeping the development model old development model 18
  19. 19. Thank You

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