Fitch Ratings has affirmed Tunisia’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘B+’. The Outlook is Stable, the ratings agency said.
The issue ratings on Tunisia’s senior unsecured bonds have also been affirmed at ‘B+’. Fitch has affirmed the Short-Term Foreign- and Local-Currency IDRs at ‘B’ and the Country Ceiling at ‘BB-‘.
Tunisia’s ‘B+’ IDRs with Stable Outlook reflect the following key rating drivers: Tunisia has a high and growing government debt burden and external sector imbalances, relatively high contingent liabilities stemming from weak state-owned enterprises and banks, and limited reform momentum in the context of a fragile social and political context.
Episodes of social unrest have intensified, as the combination of high unemployment (at 15.3% in 1Q17), rising inflation, and a weakening currency is putting increasing pressure on household purchasing power, despite the government’s attempt to channel more investment to under-developed areas, said Fitch Ratings.
On 10 May, Tunisia’s president ordered a deployment of the army to protect oil and phosphate production sites, where in some cases protest activity has interrupted production.
The move should allow production from these sites to resume. However, there is a risk, and some early evidence, that the government’s firm response may exacerbate tensions.
After GDP growth of 1.1% in 2016, Fitch projects growth of 2.3% in 2017 and 2.5% in 2018, to be driven by private consumption (supported by wage growth), a pickup in tourist inflows, and investment (aided by the passing of an investment law in April).
African Manager
Comments are closed.