Tunisia - Economy

Agriculture, which engages about 22% of the labor force, is still the mainstay of the Tunisian economy, although minerals (especially crude oil and phosphates) and tourism are the leading sources of foreign exchange. Industrial development has increased rapidly since the 1960s. Tunisians live a middle class life-style with almost 80% of household owning their own home. The GDP grew by 4.7% annually during 1961–70, by 7.3% during 1970–81, by only 2.9% during 1982–87, and by 4.6% during 1988–98. It stood at 4.8% in 2001. An association agreement with the European Union signed in 1998 was forecast to have negative short-term effects to the economy (due to the required drop of trade barriers), but positive long-term effects.

After a period of socialist economic policies Tunisia began a structural reform program with the IMF designed to encourage a market-based economy. Privatization of state-owned enterprises began in 1987 with 67 of the government's 189 companies privatized through 1995. The privatization program, however, focused on smaller companies so as not to disrupt employment. Privatization of the energy, construction materials, and transport sectors, all of which contain unprofitable and overstaffed entities, has yet to occur. The reforms also decontrolled domestic prices and liberalized foreign trade. The private sector accounted for about 60% of output in 1999.

Tourism, increasing as a growth sector, experienced a decline in 2001 following the 11 September 2001 terrorist attacks on the US: in 2002, there were 13% fewer tourists arriving in Tunisia in the first half of 2002 than during the same period in 2001. However, the government doubled its expenditures on tourism promotion in 2002. A drought in 2001–02 caused a decrease in cereal production, as well as in the production of olive oil.

Despite the beneficial effects that privatizing state-owned enterprises and introducing market reforms can have on the economy (including increasing foreign investment), there are drawbacks. Unemployment remained high in 2003, and the government acknowledged that jobs were being lost through privatization. In 2002, the banking and insurance sectors began to be privatized. Foreign trade, in terms both of imports and exports, increased markedly in 2001–02. The increases in exports during those years were due to the textile and clothing sector, leather and footwear sector, mechanical and electrical industries, and the agro-food, phosphates, and energy sectors.

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