Tunisia is currently facing a complex economic scenario known as stagflation, marked by slow growth, high unemployment, and sustained inflation. This situation is a major challenge, as each of these characteristics poses a significant problem on its own. The country's economic difficulties are largely due to deep-seated structural imbalances, including regulatory rigidities, a high public debt burden, liquidity constraints, and logistical and productive bottlenecks.
The Tunisian economy has been struggling to achieve dynamic growth rates, which are necessary to absorb youth and graduate unemployment. Inflation has persisted due to supply chain tensions, rising commodity and energy prices, and domestic budgetary imbalances. The unemployment rate remains structurally high, particularly among young people and university graduates, while the informal sector continues to expand. However, Tunisia's stagflation is not solely the result of an uncontrollable external monetary shock.
Other countries have experienced stagflation or larval stagflation crises in the past, and their exit strategies offer valuable lessons for Tunisia. Spain faced high inflation and endemic unemployment in the early 1990s, exacerbated by a lack of external competitiveness. However, the country has since reversed this trend by opting for European integration and economic openness rather than protectionism. This approach involved tripartite social pacts to moderate wages in exchange for structural reforms.
Spain's strategy also included strict budgetary discipline to meet convergence criteria and massive investments in infrastructure to stimulate productivity. As a result, the country achieved a profound transformation of its productive fabric, a structural decrease in inflation, and successful integration into global value chains, leading to strong job creation. Tunisia can draw inspiration from Spain's experience.
To overcome its current challenges, Tunisia must address two complementary fronts: short-term macroeconomic stabilization and medium-term liberalization of the productive apparatus. The fight against inflation should not rely solely on blind monetary contraction, which would weigh on private investment. Instead, it requires gradual public finance consolidation, reduced reliance on monetary financing, and rationalization of subsidies.
It is essential to consider replacing generalized subsidies with targeted assistance to vulnerable populations. Although the current situation does not allow for this, such a maneuver would free up crucial budgetary margins for public investment in infrastructure and energy transition once international prices normalize. This could also be used to restructure loss-making public enterprises.
The response to stagflation must focus on increasing the country's production capacity, which involves continuing efforts to improve the business climate by simplifying administrative procedures, reducing taxation on productive investment, and eliminating unjustified authorizations and monopolies that hinder private initiative and encourage informality. Tunisia's ability to implement these reforms will be crucial in overcoming its current economic challenges.
Key points
- Tunisia's stagflation is largely a result of deep-seated structural imbalances.
- The country can draw inspiration from Spain's experience in overcoming stagflation through European integration and economic openness.
- Tunisia must address short-term macroeconomic stabilization and medium-term liberalization of the productive apparatus to overcome its current challenges.
