THEY ARE BACK! THIS TIME WITHOUT THE ELEPHANTS!

This week, we shed some light on how Tunisia has been able to avoid being affected by the global economic slowdown. We also take a closer look at why this small country is projected to play a larger role in the global economy.It is not the first time these vigorous northern Africans, formerly known as the Carthaginians, surprise those around them. Way back in 218BC the larger-than-life General Hannibal, made a big impression by crossing the Alps, covered in snow, with an army of 50.000 men, cavalry and even elephants to severely rattle and take a large piece of the Roman empire.

Today, Tunisia is a vibrant little country of 10.4 million people located in North Africa off the Mediterranean Sea. It is set to enjoy a prolonged period of growth, according to a recent report from the International Monetary Fund*.
Tunisia has managed to avoid damage from the fallout of the global economic crisis, mainly thanks to its diversified and open economy. However, Tunisia will need to keep a lid on the current account deficit while maintaining economical reforms to enable the country to minimise any potential weaknesses.

In its report, the IMF stated that the nation’s GDP could expand by almost 4% this year, up from 3.1% in 2009. This favourable outcome is largely attributable to the reform program undertaken in recent years as well as to sound macroeconomic policies which have enabled its authorities to mitigate the impact of the crisis through appropriate and supportive policy measures.

Under the new presidential program, Tunisia’s government will be aiming for annual economic growth of 5.5% over the next five years as it implements reforms and seeks a rapid expansion of its service industries. It expects up to 70% of this growth to come from the services sector, 4.9% from agriculture, 18.6% from manufacturing and 6.5% from non-manufacturing industries.

Tunisia has been trying to accelerate growth to absorb a high number of jobless graduates. While the Tunisian economy did relatively well in comparison with the rest of the world, unemployment edged slightly higher in 2009. Foreign direct investment (FDI) is expected to soar to 9.2 billion Euros in 2014, meaning it would grow seven-fold from levels of 1.3 billion Euros in 2009! The reforms the government is planning to implement are aimed at further improving the business environment, further freeing up the movement of capital and advancing towards full convertibility of the Dinar, Tunisia’s unit of currency.

Tunisia has one of the most open economies in Africa and attracts substantial investment from the European Union. However, the International Monetary Fund hedged its positive stance somewhat by suggesting that Tunisia was potentially vulnerable to a recession scenario in the EU.

Tunisia stands out amongst other countries in the MENA region for its loose restrictions on foreign investment, according to a recent World Bank report; “Investing Across Borders 2010″. Tunisia was encouraging foreign investment by offering easier procedures and opportunities for inflows into several sectors. Tunisia is increasingly open to doing business with countries in the Maghreb, Europe and further afield.

In the first half of 2010, Tunisian exports reached 5.95 billion resulting in a 19.2% growth when compared to the same period of 2009. Imports rose by 31.1% compared to 2009, reaching 8.3 billion Euros. The significant volume of imports augurs a continuous growth of the rate of exports in the future, a recovery of investment and the capacity of resilience of the national economy to external shocks. Much of the rise in imports stemmed from investment in equipment and raw materials, this should be seen as a leading indicator for higher levels of production to come.

The increase in exports is the result of growth in the mechanical and electrical industries which reached a turnover of 2.05 billion Euros, positioning it as the highest contributor to Tunisian exports with a share of 34.5%.
The textile and clothing sector ranks second with a share of 22.3%. The European Union remains Tunisia’s largest customer with a volume of exports reaching 4.4 billion Euros, posting a growth of 18.32% compared to the same period of 2009 while exports to the Maghreb Union posted a slight decrease of 4.16% reaching a value of 512 million Euros in 2009. Exports to the Far East also declined by 5.14%. In Addition, exports to North America and other countries outside the EU soared, increasing by 115.61% and 101.05%, respectively!

The IMF also had very good things to say about the Tunisian financial sector as it had not been affected by the global financial crisis. The report stated that credit levels had remained steady and that the Bourse de Tunis continues to record exceptional growth.

Companies listed on the Tunisian Stock Exchange reflected the economy’s good performance with most of the listed companies posting double digit growth of their top lines. Following are a few examples:

• The Poulina Group Holding, the largest Tunisian Market Cap., Overall revenues in H1 ‘10 jumped 24% yoy with a 26% jump in domestic revenues and a 15% rise in export revenues
• Tunisie Profiles Aluminium (TPR), Tunisia number one aluminium manufacturer, has also announced excellent top Line figures for H1 2010 on the back of double digit growth of exports to Europe, mainly to France and Italy, and to neighbouring countries such as Libya and Algeria. TPR’s Revenues increased by 23% yoy, with Domestic sales rising 23%, while its Export sales went up 24% yoy
• For ASSAD, the largest Tunisian car battery manufacturer, overall revenues in H1 ‘10 increased by 14.7% yoy, driven mainly by a 37.1% rise in export revenues, while local revenues went down by 14%.
• Amen Bank’s first half figures posted a 17% increase in revenues, while Net Banking Income improved by 18%.