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Moez Labidi - Professor of Economics at the University of Monastir in TunisiaIn 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, LebanonMay 18th, 2012.
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Tunisian Economy and the Challenges
of Democratic Transition
The Road to Democracy :the Arab Region, Latin America and Eastern
EuropeBeirut Friday, 18th May 2012
Moez LABIDIUniversity of Monastir - Tunisia
2 - Tunisian economy and the « revolution choc »
4 - Preliminary assessment of the Tunisian economic
situation
2
3 - The challenges of democratic transition in Tunisia
1 - Revolution outbreak main reasons
5 - Conclusion
2
3
1 - Revolution outbreak main reasons
3
Technological
Widespread of high tech Political
Goverment corruption
Human rights violation
Economical
Unemployment high levels
Regional inequalities
4
Technological
Political
Goverment corruption
Human rights violation
Economical
Unemployment high levels
Regional inequalities
Dignity - Justice - Freedom
Revolution
5
2 - Tunisian economy and the « revolution choc »
6
1 - Revolution outbreak main reasons
6
Political
Security
Libye Growth-2,2 %2011 Europe
Fiscal revenuesUnemployment
unemployment Fiscal revenues
EconomyInvDomestic : Wait & See
attitude
Banks : Non-performing loans
Inv Foreign : outflow
7
Fiscal relief
Fiscal policy Expansionary spending policy
Wages increase
Political uncertaintyDownturn in fiscal revenuesIncreasing social demands
Increase in budget deficit
Massive public sector hiring
Bailout of busnisses
8
Monetary Policy : ultra-expansionary 12,5 %
2 %
4,5 %
3,5 %
Interest rate Reserves requirements
3500 Mns TND
Liquidity injection
Political uncertaintyinsecurity
Weak governance in the banking sector
Distortion in Monetry policy Transmission mecanisms 9
2 - Tunisian economy and the « revolution choc »
10
3 - The challenges of democratic transition in Tunisia
1 - Revolution outbreak main reasons
10
An urgent need for jobs
and investment
Govermental
limited resources
Current economic situation
Tunisians’
expectations
11
Social challenge
gap
Clearer political and
economical vision
Seek refuge in
easy solution
Defects in
fiscal balances
New
perspectivesgap
12
Pressure on bank liquidity
Liquidité
ShortageCentral bank
intervention
Allocation of long-
term resources
Boosting investment
Purchasing power decrease
Negative real interest rate
Low Saving rate
Economy
funding Businesses bailout
Currency reserves decrease
Financing
needs
Regional development funding projects
foreign investment fallCurrent account deficit
External debt
International financial
market
Multilateral / Bilateral
External financing
13
2 - Tunisian economy and the « revolution choc »
4 - Preliminary assessment of the Tunisian economic
situation
14
3 - The challenges of democratic transition in Tunisia
1 - Revolution outbreak main reasons
14
Budget deficit
6,6 %GDP
2012
* Initial economic recovery in Q1 201 :
Tourism (+32,8 % ); FDI(+28,3%)
*Assemption : difficult to achieve
* European debt crises
PublicDebt
45,9 %GDP
2012
* Sustainable level
* Acceptable debt terms(Interest rate/maturity/ Currencies ) * High current account deficit
*Exchage rate depreciation
Satisfactory indicators Vulnerabilities
Inflation Q1 2012
5,4 % * Core inflationary stability * Sharp food price increase
* Exchange rate depreciation
* « Second-round effects »
rating BBB -* Acceptable ranking compared with regional competitors
* Current account deficit (2,3 %) *Budget deficit : 6,6 % (2012)
* Lowest « Investment grate »
2 - Tunisian economy and the « revolution choc »
4 - Preliminary assessment of the Tunisian economic
situation
16
3 - The challenges of democratic transition in Tunisia
1 - Revolution outbreak main reasons
5 - Conclusion
16
Economic transition
Political transition
17
New development model Revolution requirements
Is the current islamist goverment able to change the developmental model ?
Stick to radical speech
Shrink its popularity
Keeping the old development model
Answering populists demands
Modernise its political speech
Enlarge its popularity
Switch to a new development model
Starting with essential reforms
18
Thank You