Tunisia: 2025 Economic Overview

Image credit: Shutterstock / Alex Cimbal

First, a broad brushstroke—Tunisia is acknowledged as Africa’s most competitive economy, one whose industrial matrix spans petroleum phosphate and iron ore mining, textiles, and, of course, tourism.

According to the African Economic Outlook (AEO) 2024, Tunisia ranks 101st among 193 countries worldwide on the 2022 Human Development Index and 5th of 54 African countries.

The study notes that structural transformation is to the advantage of the services sector, which is hugely important as a 65% contributor to GDP and generator of around 50% of employment compared with the industrial sector’s 25% contribution.

Tunisia also ranked 79th among the 132 nations on the Global Innovation Index 2023 and 150th out of 184 countries on the 2023 Index of Economic Freedom.

According to the World Travel & Tourism Council’s (WTTC) 2024 Economic Impact Research (EIR) report, tourism alone was projected to generate 2024 revenues of USD7.3 billion and account for 14% of GDP.

The organization declared that the initiatives of the Higher Council of Tourism could see that figure reach USD10 billion a year over the next decade, with a 16% rise in annual contribution.

The sector is expected to employ around 485,000 people by then.

How Far for Growth?

Private sector momentum suffers from the government’s high borrowing, among others, from banks and the Central Bank, which dents economic growth while perpetuating inflation.

The World Bank (WB) lowered its 2024 GDP growth projection to 1.2%, half April’s previous forecast.

Its October 16, 2024 report, “Growth in the Middle East and North Africa,” foresaw growth stabilizing at 2.2% in 2025.

Geopolitical shifts are identified as affecting growth across the entire MENA region—the WB puts the number at just 2.2% in 2024, though up YoY from 1.8%.

Turning to the European Bank for Reconstruction and Development (EBRD), this institution in September 2024 forecasted moderate 2.8% growth in the southern and eastern Mediterranean (SEMED) region.

The EBRD also expects a humble GDP performance from Tunisia of 1.2% in 2024 and 1.8% in 2025, propped by declining inflation (30-month low of 7% in July 2024).

It also predicts an improving current account balance, with weaker performance from agriculture and mining compensated by vibrant tourism, financial services, and select industrial sectors such as mechanical and electrical goods.

Note, too, that last March, Moody’s raised Tunisia’s outlook from negative to ‘stable’ thanks to recognized access to external funding, while noting that more was required to keep pace with the IMF’s Tunisia program.

FDI: The Good and the Less So

Myriad advantages are attracting FDI to the country.

Tunisia lies within a short hop of Europe, sub-Saharan Africa, and the Middle East, and enjoys free trade agreements with the EU and countries across the African continent.

National solvency spells access to international capital markets, which amounts to a seat at the world economy’s table.

The catalyst of economic diversification away from hydrocarbons, too, comes into play—a boon in times of commodity price fluctuations.

Structural reforms have advanced economic liberalization; the current competition law has done away with previous fixed prices and opened the door to investment in once-banned sectors.

Bureaucratic rationalization has facilitated getting licenses, permits and investment authorization, and the High Investment Board has centralized bureaucratic procedures once involving numerous agencies.

More flexible labor market rules today also allow for the hiring of foreign staff.

Weaknesses disincentivizing investment include nepotism, regional imbalances, and customs and tax regimes that curb the flourishing of SMEs beyond national borders—those businesses number around 80,000 and account for roughly 40% of GDP.

The US State Department estimates the informal economy to remain a huge burden on state coffers at between 40% and 60% of the total.

Additionally, significant economic power remaining in state hands and the related rise in public debt that consumes domestic financing, in turn crowds out private sector activity.

Recent Activity

Given the commercial headwinds mentioned above, FDI in Tunisia is both a case of despite and due to prevailing circumstances.

FDI rose by USD278.7 million in June 2024, compared with the USD132.7 million of the previous quarter.

Data from the Tunisian Foreign Investment Promotion Agency (FIPA) released in August 2024 indicated that foreign investments (such as securities) in the first half of the year had risen 13.8% from 2023’s same period, with 3,300 European firms present in the country and employing 407,000 people.

Meanwhile, foreign direct investment (FDI) rose by 26.6% to roughly USD430 million over 1H2023. The lion’s share went to the manufacturing industries sector at around USD246 million, up from USD163 million in 1H2023.

Energy sector investment of USD100 million compared favorably to USD73.4 million from January to June 2023.

The agricultural sector posted a 300% rise from USD908,000 in 1H2023 to USD3.6 million in 1H2024.

Yet the services sector declined by 21.9% to USD73.2 million in 1H2024, from USD101 million in 1H2023.

A total of 610 investment activities with a total value of approximately USD1.1 billion put around 4,820 in work in 1H2024. France tops the investor list for 1H2024 with USD107 million of total investment, claiming 325 of the total.

The top three were completed by Italy at USD44 million and Germany at USD36 million.

Despite a skilled Tunisian workforce and positive structural reforms, the economy remains far from reaching its true potential, held up by heavy state borrowing and a vast irregular economy that applies the brakes on effective private sector performance.