Tunisia faced several blows during the last weeks, from a sudden stop in agricultural production in Q1 to a record trade deficit in April and a vanishing recovery of foreign reserves. In Q1, GDP growth fell back to the lowest rate in the last three years (+1.1% y/y). Agricultural output suddenly stabilized in Q1 after +9.5% growth in 2018, and manufacturing production declined (-0.6% y/y), worsening from already weak dynamics (+0.5% on average p.a. during the last five years). This meager performance of export-oriented sectors contributed to the worst trade deficit in history in April (-TND2.4bn), not boding well for the overall rebalancing of the economy after an already record -11.2% of GDP current account deficit in 2018. As a result, the import cover of foreign reserves faltered again to 74 days in April (after a stabilization allowed by foreign loans). Overall, with GDP growth forecast at +1.5% and public debt at 82% of GDP in 2019 (the latter up from 77% in 2018), we expect exchange rate pressures to persist.
