Moody’s Investors Service downgraded Tunisia’s credit rating to B3, six notches below investment grade, as a result of the government’s weakening ability to implement fiscal and public sector reforms amid rising political tensions in the country.
The downgrade reflects weaker governance in the face of rising social constraints in impediment to reforms that are needed to
stabilise, and eventually reverse a marked increase in Tunisia's debt burden, the ratings agency said late Tuesday.
The government’s push to revive the economy requires a broad agreement with civil society institutions, however, parliamentary fragmentation and the increasingly contentious political environment weighs on the government's decision-making capacity.
“Reforms are critical to rebalance Tunisia's fiscal accounts and ensure debt sustainability in the future, amid a subdued growth outlook,” Moody’s said. “The reforms are also challenging in that they will involve both protecting the most vulnerable part of the population while achieving financially significant results that help the government regain some fiscal flexibility.”
Tunisia’s negative outlook also reflects downside risks related to further delays with the negotiation and implementation of an International Monetary Fund programme, an objective outlined by the government.
Renewed social protests, ahead of the announcement of specific measures by the Tunisian government suggest that the implementation of fiscal consolidation and public sector reforms is likely to be a highly protracted process, Moody's said.
“Such delays would increase uncertainty around the government's capacity to secure continued access to official external funding sources and maintain international capital market access at affordable terms in order to meet high funding requirements over the next few years,” it said.
Last April, the IMF approved a $745 million emergency loan for Tunisia to help the country mitigate the impact of the Covid-19 crisis on its economy.
However, the North African nation’s economy is estimated to have contracted 8.2 per cent in 2020, resulting in higher poverty and unemployment. Its fiscal deficit is also projected to have widened to 11.5 per cent of its gross domestic product, the IMF said in January.
The fund has called for “credible” reforms in civil service wage bill, which has increased to over 17 per cent of GDP in 2020 and is among the largest globally. Subsidy structure, the role of state-owned enterprises in the economy, the informal sector, tax equity, anti-corruption efforts and improvement in the country’s business environment are among the other reforms urged by the IMF.
It expects Tunisia’s GDP growth to rebound to 3.8 per cent this year, which is in line with Moody’s estimates of about 4 per cent expansion in 2021. The ratings agency expects growth to average 2-3 per cent per year thereafter.
Tunisia’s, which is largely reliant on tourism, has taken a hit in the wake of the Covid-19 crisis. Its debt-to-GDP ratio is set to rise to about 90 per cent this year from 84.7 per cent in 2020 and 72.3 per cent in 2019, according to Moody's. It will continue to edge higher in the next few years.
The country has upcoming debt service payments and maturities of over $1 billion in 2021 and 2024 and financing needs that account for 15-17 per cent of GDP, compared with 10 per cent before the pandemic, according to Moody’s.
South and West: From a Notebook
Joan Didion
Fourth Estate
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
UAE currency: the story behind the money in your pockets
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UAE currency: the story behind the money in your pockets
Kat Wightman's tips on how to create zones in large spaces
- Area carpets or rugs are the easiest way to segregate spaces while also unifying them.
- Lighting can help define areas. Try pendant lighting over dining tables, and side and floor lamps in living areas.
- Keep the colour palette the same in a room, but combine different tones and textures in different zone. A common accent colour dotted throughout the space brings it together.
- Don’t be afraid to use furniture to break up the space. For example, if you have a sofa placed in the middle of the room, a console unit behind it will give good punctuation.
- Use a considered collection of prints and artworks that work together to form a cohesive journey.
How will Gen Alpha invest?
Mark Chahwan, co-founder and chief executive of robo-advisory firm Sarwa, forecasts that Generation Alpha (born between 2010 and 2024) will start investing in their teenage years and therefore benefit from compound interest.
“Technology and education should be the main drivers to make this happen, whether it’s investing in a few clicks or their schools/parents stepping up their personal finance education skills,” he adds.
Mr Chahwan says younger generations have a higher capacity to take on risk, but for some their appetite can be more cautious because they are investing for the first time. “Schools still do not teach personal finance and stock market investing, so a lot of the learning journey can feel daunting and intimidating,” he says.
He advises millennials to not always start with an aggressive portfolio even if they can afford to take risks. “We always advise to work your way up to your risk capacity, that way you experience volatility and get used to it. Given the higher risk capacity for the younger generations, stocks are a favourite,” says Mr Chahwan.
Highlighting the role technology has played in encouraging millennials and Gen Z to invest, he says: “They were often excluded, but with lower account minimums ... a customer with $1,000 [Dh3,672] in their account has their money working for them just as hard as the portfolio of a high get-worth individual.”
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What is the definition of an SME?
SMEs in the UAE are defined by the number of employees, annual turnover and sector. For example, a “small company” in the services industry has six to 50 employees with a turnover of more than Dh2 million up to Dh20m, while in the manufacturing industry the requirements are 10 to 100 employees with a turnover of more than Dh3m up to Dh50m, according to Dubai SME, an agency of the Department of Economic Development.
A “medium-sized company” can either have staff of 51 to 200 employees or 101 to 250 employees, and a turnover less than or equal to Dh200m or Dh250m, again depending on whether the business is in the trading, manufacturing or services sectors.
How being social media savvy can improve your well being
Next time when procastinating online remember that you can save thousands on paying for a personal trainer and a gym membership simply by watching YouTube videos and keeping up with the latest health tips and trends.
As social media apps are becoming more and more consumed by health experts and nutritionists who are using it to awareness and encourage patients to engage in physical activity.
Elizabeth Watson, a personal trainer from Stay Fit gym in Abu Dhabi suggests that “individuals can use social media as a means of keeping fit, there are a lot of great exercises you can do and train from experts at home just by watching videos on YouTube”.
Norlyn Torrena, a clinical nutritionist from Burjeel Hospital advises her clients to be more technologically active “most of my clients are so engaged with their phones that I advise them to download applications that offer health related services”.
Torrena said that “most people believe that dieting and keeping fit is boring”.
However, by using social media apps keeping fit means that people are “modern and are kept up to date with the latest heath tips and trends”.
“It can be a guide to a healthy lifestyle and exercise if used in the correct way, so I really encourage my clients to download health applications” said Mrs Torrena.
People can also connect with each other and exchange “tips and notes, it’s extremely healthy and fun”.
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Staff: 200
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