Sunday, April 15, 2018 /05:03AM / Proshare Research
· First of all the negative effect on the price of oil could affect the potential of oil revenue moving forward
· However, the tariffs splashed on American exports put Nigeria and South American countries at an advantage to export agricultural goods to China, especially Soya beans.
· The tariffs could led to high premium on American consumers, thus affecting remittances negatively
· The growing policy uncertainty will continue to weigh down prices of equities by such emerging and frontier economies will not be excluded.
· The policy uncertainty will create headwinds for policy makers, thus threatening their medium to long term objective.
Tunisia: A tale of tough love
Tunisia has come a long way after the Arab spring. The Maghreb nation has carefully meandered through political landmines in order to avoid spilling into political crisis like its neighbor Libya. Tunisia unlike many other African and Middle East countries which are resource dependent is not resource dependent but rather largely driven by its tourist and agricultural sectors.
Fig 6: Growth among certain North African Countries
Source: World Bank: (2018 to 2020 are forecasted growth)
The instability within Libya has further burdened an already tense situation in Tunisia which has led to successive incidence of terror attacks. The effect has resulted in a leaner private sector and smaller revenue to the government.
The country finds itself suffering from a twin deficit of budget deficit and balance of trade (BOT) deficit. In addition, public debt has risen sharply to 90% of GDP. Even though the nation finds itself growing at 2%, there is urgency for reforms. However, the dilemma of carrying out macro readjustment in the face of 30% unemployment is of great concern.
A rather balance approach have been settled for, so as to avoid spurring social political instability. Policy prescription was thus inclusive of the following:
· Mobilize domestic revenue by improving the tax contribution
· Contain Energy subside
· Limit the growth in public wages
· Fund pension more sustainably
· Provide safety nets for the most vulnerable
· Tighten interest to combat the rising food inflation
· Put in place a public private partnership law
Although the approach is more concerned about spreading budget balancing over a period, the short term pains are inevitable. Regardless, the ability to mobilize domestic resources in order to bolster investments addresses the root cause of unemployment in the long run.
Tunisia is thus in need of the reforms to improve its competitiveness, reduce government size and improve attraction for private capital. No doubt it is a tale of tough love.