Tunis/Tunisia — If Tunisia is struggling today to rebound while other countries have recovered very quickly and very firmly in 2021, it is because it is losing production factors (capital and labour), considers academic Fatma Marrakchi Charfi in a statement to TAP on the fringes of a webinar organised recently by the Think Tank Global Institute for Transitions (GI4T).
The webinar on the theme: "And the economy! Where are we going?," was held as part of the public debate on the 2022 Finance Law and the solutions left for Tunisia to get out of its economic crisis.
At a time when partner countries, including France, Italy, Spain, etc. have seen rebound rates of over 70% and sometimes even over 100% for the U.S.A., and when MENA countries (Morocco, Algeria, etc.) have bounced back by 90% and 70%, respectively, Tunisia has not managed to recover in 2021, the 1/3 of what it lost in terms of growth in 2020. Even more, the potential growth in Tunisia is zero or even slightly negative, Marrakchi underlined.
Still according to her, this failure to recover is explained by the drastic decline in production factors due to the phenomenon of brain drain (engineers, doctors, teachers, etc.), which has further worsened the labour market, and the decline in investment, which is the cause of the erosion of the capital stock.
National investment is now less than 10% of GDP, whereas it was around 25% in 2010.
Accordingly, she considered that in order to return to the virtuous path of growth, it is crucial to boost the engines of growth, mainly investment: Public investment by freeing up the necessary fiscal space, by monitoring the execution of these investments and by resolving the problems that arise along the way and that can slow down the progress of these projects; but also private investment by working on the business climate and by ensuring that the arsenal of authorisations required to access certain sectors is reduced/eliminated and that the cumbersome administrative machinery of authorisations is overcome.
Stabilisation of the economy is necessary but not sufficient!
Marrakchi argues that the country's economic problems and challenges are known to all, but they are intertwined and complicated. To give an overview of the situation, the academic analysed three indicators that are interrelated, namely the budget deficit, the current account deficit and the public debt.
Regarding the budget deficit, she pointed out that "not only is it widening over the years, but there is also a so-called primary deficit in the budget, which means that the state's own revenue (tax and non-tax revenue) cannot cover the needs of the budget year, without taking into account debt servicing, which is not the responsibility of the current government during the year. To return to a primary surplus or a zero budgetary balance, it is necessary to increase the level of own-source revenue and reduce state expenditure.
This process can be facilitated, in her view, by cross-cutting reforms that will serve to free up the fiscal space necessary to improve the level of public investment, which has always been the adjustment variable in the state budget.
The key reforms are: Tax reform for a more egalitarian tax policy by broadening the tax base rather than raising the already high tax rates; civil service reform to improve efficiency in the state's functioning; subsidy reform to avoid a lot of waste in state expenditures and reform of public enterprises to provide resources to the state rather than draining its revenues and budget.
As for the current account deficit, Marrakchi recalled that it is mainly due to the trade deficit which is no longer covered by the surplus of the balance of services as it was largely the case before 2011, given the fall in phosphate exports, the increase in imports of energy products and the drop in tourism revenues, following the terrorist attacks.
"The two current account and budget deficits, when they are concomitant, are twin deficits that feed each other and raise the level of the country's debt and especially the public debt, which is why the problem of debt sustainability is increasingly being raised today," she explained.
She went on to say, "but in reality, the imbalances described above are only the apparent side of the iceberg. The real problem is a lack of competitiveness and a lack of wealth creation, exacerbated by the pandemic, with the halt in economic activity... Actually, it is growth that is lacking.
Thus, she concludes, the stabilisation of the economy is important and is an essential and necessary step, but not sufficient to restart the productive machine. Hence the importance of reserving more fiscal space for public investment, which could be achieved by implementing cross-cutting reforms without delay, and also of working on measures to boost private investment by liberalising private initiative and removing barriers to investors' participation.
Translated by Ben D'haou Nejiba