Chapter 1

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costly process of adjustment, the average GDP growth rate of human capital (progress that in fact was initiated before for the whole 1987-94 period may understate the benefits the adjustment program of 1986), financial deepening, of reform. If this is the case, the average GDP growth rate abatement of price distortions, decrease of nonproductive during 1990-94 may better reflect the impact of the reform public expenditures, and higher openness to intemational measures. Table 4.4 presents the actual growth rates for the competition and trade, all contributed significantly to the reform periods 1987-94 and 1990-94, as well as that for the increase of the per capita GDP growth rate. Had the averprereform period 1981-86. age investment-to-GDP ratio remained the same in the sec- Most importantly, table 4.4 reports the contribution of ond period, the growth rate would have increased by 1.97 the relevant proxy variables to the improvement in the per percentage points. This increase implies an improvement in capita GDP growth rate. The increase in the growth rate the efficiency of capital investment. However, the average predicted by the change in the proxy variables (1.19 per- ratio of gross domestic investment to GDP was 5.22 percentage points) is quite close to the actual increase (1.29 if centage points lower in the period 1987-94 than in the improvement is measured with respect to 1987-94, or 1981-86. According to the estimates presented in table 4.3, 1.58 if with respect to 1990-94.) Advancement in the level this large fall may in principle cause a decline in the per capita GDP growth rate anywhere from 0.52 to 1.04 per- TAKLE 4.4 centage points. Given that in Tunisia most of the reduction Determinants of growth improvement in Tunisia in domestic investment was related to public enterprises Contribution to the with low productivity, a growth-rate reduction of 0.78 per- Variable Average 1981-86 Average 1987-94 improvement in the per capita GDP growth rate (percent), centage points (the midpoint estimate presented in table 4.4) may overstate the adverse effect of the investment/GDP decline in the latter period. This partialy Investment/GDpb 29.30 24.08 -0.78metG Pdcieith laerpio.Tsprily pet2ent percent explains why the predicted growth-rate improvement in Secondary education' Govemment spending on education/GDP 0.52 years 5.56 percent 0.73 years 5.84 percent 0.21 0.06 table 4.4 falls short of the actual improvement and represents for economic policy. targets Life expectancy at birth 63.61 years 66.36 years 0.34 M2/GDP 43.86 48.57 0.14 Key macroeconomic indicators: Black market exchange percent 10.60 percent 1.80 0.35 Medium-term outlook rate (premium over official rate) percent percent Table 4.5 presents medium-term projections for key macro- Government consumption (net of education spending)/GDP Average tariff rated 10.87 percent 40.00 10.49 percent 33.00 0.05 0.14 economic indicators under two altemative scenarios, namely, moderate and hh growth. The two scenarios presume a continuation of both macroeconomic stability and Exports/GDP percent 24.63 percent 36.00 0.68 structural reforms. The moderate-growth scenario reprepercent percent sents, to a large extent, an economy similar to that of the last Growth rate of per capita GDP' eight years. The high-growth scenario, on the other hand, 1981-86 1987-94 1.15 percent 2.44 percent assumes an acceleration of the pace of reform implementa- 1990-94 2.73 percent tion and represents targets for economic policy. Acual growth Improvment In 1987-94 with respect to 1981-86 1.29 percentage points At the sectoral level, the main sources of growth under both scenarios are the manufacturing and service sectors. In 1990-94 with respect to 1981-86 1.58 percentage points In the high-growth scenario the manufacturing sector Predicted growth Improvement 1. 1 9 percentage points grows at an average of 8.5 percent per year. The service a. The estimated effects on growth gien as a range d vaiues in table 4.3 are used as the midpoint for this table's calations. sector, especialy financial services, transport, and b. Exduding the Gazoduc and Misbr projects. telecommunication will have to satisfy the demand stemc. The figures correspond to the years 1980 and 1985, respeciely. d. The fi as correspond to the years 1986 and 1993, respectively. ming from this higher level of economic activity e. Expo of nonpetroleum. nonphosphate products. more than 6 percent per year. In the moderate-growth scef Average growth rates are alcued using the laant-squan method e Source: Uold Bank calcuatiorn. nario, manufacturing value added grows in line with past growing 48 TUNISIAS GLOBAL INTEGRATON AND SUSTAINABLE DEvELOPMENT STRATEGIC CHOICES FOR THE 21ST CENTURY
years at between 5 percent and 6 percent, whereas the ser- high-growth scenario mainly because of a further rationalvice sector remains under 5 percent per year. Within the ization of current expenditures and transfers to public service sector in the high-growth scenario, tourism is pro- enterprises. (The high-growth scenario assumes that trade jected to slightly decrease its weight following a policy taxes decrease as part of the liberalization program; howtoward the luxury market segment of the tourism industry; ever, government revenue is projected to remain at around this would render both more value added per visitor and 27 percent of GDP as VAT and income taxes rise to offset less strain on natural resources. In the moderate-growth such a decrease.) scenario, the drop in the growth rate of tourism from the Under the high-growth scenario, accelerated trade liberfirst to the second period is larger than under the high- alization, higher competitiveness in international markets growth case because a continuation of the old policy would (achieved, among other things, through a market-driven eventually lead to environmental constraints on tourism. exchange rate and flexible domestic wages and prices), and The estimate of growth in agricultural value added is conservative, reflecting environmental restrictions facing improved total factor productivity lead to an outwardly ori- Tunisia (particularly regarding water supply) and the likely TABLE 4 5 reallocation of resources to more sustainable sectors. Also, Medium-term outlook with closer trade integration with the EU, it is expected (Percent per year) that agricultural imports would replace part of domestic 1995-99 200043 production, freeing up resources for other sectors of the 1989-94 High Moderate High Moderate economy. Rate of change Actual growth growth growth growth The difference in the GDP growth rates between the two GDP market pnce 4.6 6.0 4.6 6.4 4.1 scenarios is due to both higher investment and enhanced eance Net indirect taxes ~~GDP fc 5.7 4.5 8.2 5.7 6.6 4.3 8.5 6.1 6.2 3.8 total factor productivity. This difference is larger in the sec- Agnculture 7.2 5.0 3.1 4.0 2.5 ond period (2000-03) because it is assumed that most of the transition costs of completing the reform program are paid Industry Manufacturing Mining 3.9 5.8 -2.3 5.3 7.7 -2.1 4.0 5.6 -2.1 6.7 9.4 -5.6 3.6 5.1 -5.6 for in the first period (1995-99) and that some of its bene- Hydrocarbons -2.2 -2.5 -2.6 -6.9 -6.9 fits materialize in the economy with a time lag. Using the Phosphate -2.7 0.8 0.8 0.0 0.0 Other industry 60 4.0 4.0 4.0 4.0 estimates provided in table 4.3 on the determinants of eco- Services 4.4 6.2 4.8 6.3 4.2 nomic growth, it is calculated that higher investment Tourism 4.1 6.5 6.5 5.0 4.0 explains about 30 percent of the growth difference between Other services 4.5 6.2 4.6 6.5 4.3 the two scenarios. Enhanced total factor productivity, which Gross domestic investment 7.0 9.4 6.2 9.0 5.5 explains the remaining 70 percent, is generated by both Imports 5.4 9.0 7.2 8.4 6.2 stronger market incentives for private activity (through Exports 5.1 6.8 4.9 8. 1 5.0 deregulation and privatization) and more efficient public Icor (five years) 6.5 5.0 5.5 4.3 5.8 services, particularly in infrastructure. Ratios to GOP (percent) The larger investment requirements under the high- Gross investment 26.6 26.0 24.9 28.6 25.7 growth scenario do not lead to a deterioration of the current account balance because national savings, both public Pubic Private National savings 4.9 21.7 22.1 5.0 21.0 23.0 5.0 19.9 21.6 5.0 23.6 26.3 5.0 20.7 22.5 and private, are correspondingly higher under such a sce- Current account nario. Private savings as a ratio to GDP are projected to be balance GovemmenTt -5.1 -3.0 -3.3 -2.2 -3.2 slightly larger in the high-growth scenario (particularly dur- revenue 27.7 26.9 26.7 27.1 27.3 ing the latter period, 2000-03) because of two reasons: first, the marginal propensity to save rises with national Govemment expenditure Govemment 31.2 29.0 29.8 27.7 29.7 income; and second, the reform of the financial sector, by deficiVGDP 3.4 2.2 3.2 0.7 2.4 offering better savings instruments, induces a higher rate of Debt debt 60.5 46.3 46.4 32.2 35.5 private savings. Similarly, public savings are higher, as the (percent of export) 21.6 16.0 16.3 14.4 16.3 government deficit as a ratio to GDP is smaller under the Source: World Bank projectiomns. POLICIES FOR HIGHER GROWTH 49
Page 1:
Public Disclosure Authorized Public
Page 4 and 5:
Copyright i 1996 The International
Page 6 and 7:
Education policies 20 Basic educati
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2.4 Demand for telephone connection
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Acknowledgments The report is a pro
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STIL Soci&e Tunisienne d'Industrial
Page 15 and 16:
Executive summary Elements of Tunis
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ments and controlling the expansion
Page 19 and 20: Progress in strengthening market fo
Page 21 and 22: investment banking, restructure som
Page 23 and 24: Chapter 1 Macroeconomic policy The
Page 25 and 26: Box .I Monetary policy Instruments,
Page 27 and 28: TALE 1.3 Main monetary Indicators 1
Page 29 and 30: national markets and ensure the sus
Page 31 and 32: domestic production, and inducing a
Page 33 and 34: was actually higher than that for t
Page 35: public banks and enterprises reveal
Page 38 and 39: (10 percent), and Malaysia (12 perc
Page 40 and 41: Infrastructure services: Provision
Page 42 and 43: on a pilot basis and is studying th
Page 44 and 45: or in the public sector. The Bank i
Page 46 and 47: onmental issues and their relation
Page 48 and 49: several industrial zones. Despite t
Page 50 and 51: vocational education more relevant
Page 52 and 53: also showed high effective rates of
Page 54 and 55: try an opportunity to accelerate a
Page 56 and 57: BOX 3.2 Free trade zones: Maximizin
Page 58 and 59: largest share of total employment (
Page 60 and 61: encouraging results and provides us
Page 62 and 63: ill market and to modernize the leg
Page 64 and 65: price/earnings ratio of about 25 in
Page 66 and 67: achieve their intended objectives i
Page 68 and 69: TABLE 4.2 crisis brought about an 7
Page 72 and 73: ented economy The growth of exports
Page 74 and 75: as a whole, but the related transit
Page 76 and 77: Land degradation and water scarcity
Page 78 and 79: TABLE 5.1 Poky otfecdt Short term M
Page 80 and 81: TABLE 5.2 Complementary reforms (co
Page 82 and 83: IMF (International Monetasy Fund).
Page 84 and 85: Statistical Annex TABLE SA. I Exter
Page 86 and 87: TABLE SA.3 Public sector accounts,
Page 88 and 89: TABLE Sk6 GNP, output, and governme
Page 90 and 91: TABLE SA.8 Money, credit, prices, a
Page 92 and 93: TABLE SA IO Key economic variables,
Page 96: __s~~~~0 I _ 1 , h 5 .*-~. 5~~~ i -
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