Growth has accelerated to +2.7% in 2018 from +2% in 2017, driven by tourism revenues (+45%) and agricultural output expansion (+9% in volume). Excluding these two sectors, growth would have been the same in 2017 and 2018 (+1.4%). Moreover, manufacturing output increased by +0.5% in 2018, a stable growth rate compared to the average growth observed during the last five years, but compared to +3.5% per year in the decade prior to that. It explains why overall growth acceleration was not perceived by all the Tunisians (unemployment was still increasing to 15.3% in Q3 2018). The service sector is adding +1pp per year to growth, but is highly dependent on public spending (wages, subsidies and current transfers represent about 70% of public spending). However, rising debt and IMF conditionality put a limit to this kind of spending at a time when inflation has accelerated (7.5% in 2018) as a result of the TND depreciation (-17%). Social protests and uncertainty ahead of parliamentary and presidential elections in Q4 2019 pose a downside risk to our +2.5% growth forecast for this year.
