Country risks for investors operating in Tunisia

04 September 2019

Country risks for investors operating in TunisiaTunisia will face a number of security, investment and trading challenges in the coming months. In this article we provide a detailed forward-looking assessment of developments in the country.

The lack of a definitive election front runner, and popular dissatisfaction with the ruling political coalition, will result in uncertainty ahead of national elections in September 2019.

Security Environment

Terrorism risks will remain elevated in 2019 following twin suicide attacks, which killed a police officer and wounded 12 people in Tunis on June 27, 2019.

This followed a series of terrorist attacks by Islamic State (IS) against foreign tourists at the Bardo national museum in Tunis, and at the beach resort of Sousse.

Twenty four people, including 20 foreign tourists, were killed in the 2014 attack on the museum. An armed attack on a beach resort led to 39 deaths and wounded 36 others.

The main terrorism threats to Tunisia will continue to stem from militant cells made up of IS sympathizers, attempting to infiltrate the country from Libya.

Tourism assets, especially in Bizerte, Djerba, Hammamet, Monastir, Sousse, and Tunis, will remain targets for jihadists.

Country risks for investors operating in TunisiaBusiness and transport disruption is increasingly likely near government buildings and oil and gas assets in southern and central Tunisia.

Socio-economic issues including unemployment and inflation are likely to spur localized, violent protests.

Protests are likely to affect the governorates of Gabès, Gafsa, Tataouine, Sidi Bouzid, and the poorer areas of major urban centers, including Tunis.

The possible introduction of further austerity measures will probably sustain the risk of protests ahead of the general election scheduled for September 15, 2019.

Trading Environment

Weak external demand in the Eurozone is expected to drag on exports in 2019 and 2020.

Close to 60% of Tunisia’s merchandise exports go to France, Italy, and Germany each year, leaving Tunisian manufacturers highly exposed to sluggish growth in the Eurozone in the medium term.

Economic activity will remain subdued in the near term, with real GDP growth reaching 1.7% in 2019 and 2% in 2020, down from 2.5% in 2018.

A rising import bill will also see the current account deficit widen in the coming years, putting pressure on foreign currency reserves.

Reserves stood at US$5.1 billion in May 2019, equivalent to only two months of import cover, elevating the risk.

Tunisia will be unable to service external payments.

Imports will grow by an average of 3.1% over the next decade, as the country sources large amounts of consumer goods and capital equipment from abroad.

The current account deficit will widen to 12% of GDP in 2019 and 12.9% in 2020, from 11.5% in 2018.

In addition, the country’s fuel import bill, which typically accounts for 10-20% of its import bill, will become more expensive.

Brent crude is forecast to average US$76/barrel in 2020.

The tourism sector has made a gradual recovery since 2014, with tourism export receipts reaching US$1.5 billion on a four-quarter rolling basis in Q1 2019.

However, the sector's outlook in the latter half of 2019 is fragile, following the terrorist attacks in June.

Investment Environment

Pricing outlook TunisiaUncertainty over the outcome of the upcoming general election will raise legal and regulatory risks for foreign investors.

The death of President Beiji Caid Essebi on July 25, 2019, which triggered the early presidential election, is likely to lead to the collapse of the ruling Nidaa Tones-al Nahda coalition government.

Dissatisfaction and resentment of the political class has gradually intensified since austerity measures were introduced in 2018.

This will likely drive voters toward more anti-establishment and politically unpredictable candidates.

Accordingly, the two current front runners, Nabil Karoui and Kais Saied, are candidates from minority parties outside of the legislature.

Saied is an unaffiliated candidate and an expert in constitutional law. His election may lead to increased scrutiny of investment contracts.

Karoui has no prior political experience but is an established businessman and media mogul, and as such may be risk-positive for foreign direct investment.

On the upside, Tunisia’s strategic location between Europe and Africa, and the government’s long-standing commitment to human capital development, offer a relatively favorable business environment and investment opportunities.

The manufacturing sector has started to move from low-skilled segments, such as textiles, towards higher-skilled segments including automobile manufacturing and electronics.

In terms of contract enforcement, the Tunisian parliament is gradually reviewing old laws and codes to ensure conformity with the new constitution adopted in January 2014.

Although the constitution enshrines core legal and political principles, the document contains sufficient generalities to give future governments considerable leeway in determining their own legislative agenda, raising legal risks in the long term.

5 Key Takeaways

  • Ruling Nidaa Tones-al Nahda coalition government unlikely to survive September 15 elections.
  • Dissatisfaction and resentment with the political class is likely to lead to the election of an anti-establishment candidate.
  • Terrorism risks will remain elevated in 2019 following twin suicide attacks that killed a police officer and wounded twelve others in Tunis on 27 June 2019.
  • Tourism assets, especially in Bizerte, Djerba, Hammamet, Monastir, Sousse and Tunis, will remain aspiration targets for jihadists.
  • Real GDP growth will slow to 1.7% in 2019 and 2% in 2020, down from 2.5% in 2018.

The monthly Risk Outlook is supported by our proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.

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In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for DRC, India, Mozambique and Myanmar all of which have been the subject of recent enquiries from our client base.

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  • Eleanor SmithEleanor Smith

    Eleanor Smith is a Senior Political Risk Analyst within Marsh JLT Specialty’s Credit Specialties team. At Marsh JLT Specialty, Eleanor analyses developments in political risks, and advises clients on their effect in a range of sectors. Eleanor is also responsible for delivery of World Risk Review, JLT’s country risk ratings platform, to clients and prospects.


    Eleanor has a first-class degree in History with Spanish from UCL, and a Masters in International Public Policy from the same institution. With experience in a range of sectors, including diplomatic missions and not-for-profit, Eleanor can help clients understand their risk exposure.

    If you would like to talk about any of the issues raised in this article, please contact Eleanor Smith, Senior Political Risk Analyst on +44 (0)20 8108 9544.

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