Stable state is key to growth in Tunisia

25 April 2011

A strong and stable elected government in Tunis, supportive of foreign investors, is important for much-need economic growth

During President Bill Clinton’s successful US election campaign in 1992, James Carville, Clinton’s political strategist, famously hung a sign over his desk that read: ‘It’s the economy, stupid’. The sign was meant as a reminder for Carville and his fellow campaigners that, when it comes to US politics, the most important thing is always the economy.

Almost 20 years on, and on the other side of the Atlantic, the overturning of the regime of Zine el-Abidine Ben Ali on 14 January was yet another reminder of the inseparable link between economics and politics.

Tunisia’s economy has enjoyed sound growth for much of the past 10 years, but in 2010, unemployment was still 14 per cent. About 85,000 people live below the poverty line, according to the interim government. There are also great regional disparities in prosperity. Unemployment, illiteracy and poverty rates in the inland parts of the country are much higher than in the coastal regions of Tunis and Sfax regions, where the majority of the country’s commerce is based.

The interim government has introduced an economic stimulus programme designed to encourage investment in and provide social support to those regions that have failed to benefit from the country’s growth.

Essential to political stability in the short term, this is also a costly project for the government, which is expected to run a fiscal deficit of more than 5 per cent in 2011. Higher government expenditure may be bearable for a short period, but will quickly become unsustainable if the collapse in revenues from tourism and foreign direct investment is not quickly reversed.

When it comes to the economy, what is really important is the political situation

This will depend in large part on the elections in July returning a strong and stable government and is itself supportive of foreign investors. Today in Tunisia, Carville’s aphorism might well be reversed. When it comes to the economy, what is really important is the political situation.

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