Tunisia’s Economy Set to Grow in 2025 Amid Challenges and Reform Potential

Tunisia’s economic outlook for 2025 is cautiously optimistic, with the World Bank forecasting a growth rate of 1.9 percent, up from 1.4 percent in 2024. This projected growth is bolstered by favorable weather conditions, particularly improved rainfall, and gradual stabilization in key economic sectors. Despite ongoing challenges in manufacturing, tourism and agriculture are proving resilient and playing a crucial role in the country's recovery.

According to the World Bank's latest economic update, "Better Connectivity to Grow", Tunisia is expected to maintain moderate growth rates of around 1.6 to 1.7 percent in the years 2026-2027. While global trade uncertainties and external financing constraints may pose challenges, the report emphasizes that stronger reform momentum could help improve Tunisia’s medium-term economic outlook. The positive growth trajectory hinges on efforts to modernize the economy and address underlying structural issues.

Inflation Decelerates and Interest Rates Drop

In 2025, Tunisia experienced a significant slowdown in inflation, which reached 5.6 percent in April, the lowest level since 2021. This marks a return to pre-pandemic inflation rates, a sign of stabilizing prices in the economy. Food inflation, however, remains relatively high at 7.3 percent due to seasonal factors and supply-side pressures. In response to the ongoing easing trend in inflation, the Central Bank of Tunisia took a key policy step by reducing its benchmark interest rate to 7.5 percent. This marks the first rate cut in over two years, signaling confidence in the economic recovery and efforts to encourage investment and consumption.

Trade Deficit Narrows but Trade Imbalances Remain

On the external front, Tunisia’s current account deficit narrowed to 1.7 percent of GDP in 2024. This improvement is attributed to better terms of trade and a resilient tourism sector that continues to perform well despite global uncertainties. However, Tunisia faces a widening trade deficit due to increased energy imports and a slowdown in export volumes during the first quarter of 2025, creating challenges for the country's external balance. The World Bank warns that while the external trade imbalance remains manageable for now, continued structural improvements will be essential to sustain long-term growth.

Fiscal Deficit Declines Amid Public Spending Controls

Tunisia’s fiscal deficit saw a notable reduction, dropping to 5.8 percent of GDP in 2024. This positive development was driven by controlled public spending and stable levels of subsidies. However, the World Bank cautions that the country must continue to focus on fiscal discipline to avoid future budgetary pressures, particularly with the uncertain global economic environment. Improved fiscal management will be vital as Tunisia navigates the balance between social needs and economic growth.

Improving Connectivity for Economic Growth

A central theme of the World Bank’s latest report is the potential for economic growth through enhanced trade connectivity, particularly by improving Tunisia’s port infrastructure. Tunisia’s ports have long been seen as a critical element of its trade network, but inefficiencies and bottlenecks remain. The World Bank estimates that improving port connectivity could increase GDP by 4 to 5 percent over the next three to four years.

Investing in the modernization of port facilities, reducing dwell times, and streamlining customs procedures could generate significant economic benefits. According to the World Bank's analysis, achieving port connectivity levels on par with regional peers through targeted infrastructure upgrades could result in GDP gains of 2.6 to 3.5 percent. Moreover, tackling institutional bottlenecks in customs and logistics could yield over one percent in additional growth.

The Vision for a Trans-Shipment Hub

Looking beyond the immediate term, Tunisia has the potential to become a trans-shipment hub, a central point for the global flow of goods, especially given its strategic location in the Mediterranean. The World Bank suggests that positioning Tunisia as a trans-shipment hub could deliver even greater economic benefits, potentially contributing 11 to 14 percent to GDP. To achieve this ambitious goal, Tunisia will need to pursue a comprehensive modernization strategy, including building new port terminals, upgrading equipment, improving access to ports, and reforming institutional frameworks such as port tariffs and customs procedures. Digital systems modernization and improved railway-port connectivity are also seen as crucial steps to enhance Tunisia's competitive edge in the global logistics sector.

Resilience and Reform as Key to Growth

Despite the challenges posed by global uncertainties, Tunisia’s economy is showing resilience, aided by robust sectors such as tourism and agriculture, as well as reforms in critical areas like inflation management and fiscal discipline. The country’s path to sustained growth will rely on improving trade connectivity, with the potential for significant long-term economic gains. According to Alexandre Arrobbio, World Bank Country Manager for Tunisia, “Better connectivity, especially through improved port logistics, can be a powerful engine for job creation and economic growth.”

As Tunisia moves forward, its success will depend on navigating both domestic challenges and external pressures, with a focus on structural reforms that enhance productivity and connectivity. With the right investments and policy measures, Tunisia has the potential to unlock new sources of economic growth and secure a brighter future for its people.