Moez Labidi - Professor of Economics at the University of Monastir in Tunisia In this presentation, Moez Labidi, Professor of Economics at the University of Monastir in Tunisia, discusses the current challenges of the democratic transition in Tunisia. GDN-AUB Panel Discussion on "The road to democracy: The Arab region, Latin America and Eastern Europe". Beirut, Lebanon May 18th, 2012.

1. The Road to Democracy :
the Arab Region, Latin America and Eastern Europe
Beirut Friday, 18th May 2012
Tunisian Economy
and the Challenges
of Democratic Transition
Moez LABIDI
University of Monastir - Tunisia

2. 1 - Revolution outbreak main reasons
2 - Tunisian economy and the « revolution choc »
3 - The challenges of democratic transition in Tunisia
4 - Preliminary assessment of the Tunisian economic
situation
5 - Conclusion
2

3. 1 - Revolution outbreak main reasons
3

4. Technological
Unemployment Goverment
high levels corruption
Economical Widespread of high tech Political
Regional Human rights
inequalities violation
4

5. Technological
Unemployment Goverment
high levels corruption
Economical Political
Regional Human rights
inequalities violation
Revolution
Dignity - Justice - Freedom
5

6. 1 - Revolution outbreak main reasons
2 - Tunisian economy and the « revolution choc »
6

7. unemployment
Political Fiscal revenues
Banks : Non-performing loans
Libye Growth
InvDomestic : Wait & See Economy -2,2 %
attitude Europe 2011
Inv Foreign : outflow
Security
Unemployment
Fiscal revenues 7

8. Fiscal policy
Expansionary spending policy
Fiscal relief
Bailout of busnisses
Wages increase
Massive public sector hiring
Political uncertainty
Downturn in fiscal revenues
Increasing social demands
Increase in budget deficit 8

9. Monetary Policy :
ultra-expansionary
Reserves requirements Interest rate Liquidity injection
4,5 %
12,5 %
Mns TND
2% 3,5 %
Political uncertainty
insecurity
Weak governance in the banking sector
Distortion in Monetry policy
Transmission mecanisms 9

10. 1 - Revolution outbreak main reasons
2 - Tunisian economy and the « revolution choc »
3 - The challenges of democratic transition in Tunisia
10

11. Social challenge
Tunisians’ An urgent need for jobs
expectations and investment
Clearer political and New
economical vision perspectives
gap
Seek refuge in Defects in
easy solution fiscal balances
Current Govermental
economic limited resources
situation
11

12. Pressure on bank liquidity
Economy Boosting investment
funding Businesses bailout
Allocation of long-
term resources
Liquidité
Shortage
Central bank
intervention
Low Saving Purchasing power decrease
rate Negative real interest rate
12

13. External financing
Financing Regional development
funding projects
needs
International financial
market
External debt
Multilateral / Bilateral
Currency foreign investment fall
reserves Current account deficit
decrease
13

14. 1 - Revolution outbreak main reasons
2 - Tunisian economy and the « revolution choc »
3 - The challenges of democratic transition in Tunisia
4 - Preliminary assessment of the Tunisian economic
situation
14

15. Satisfactory
Vulnerabilities
indicators
% * Initial economic recovery * Assemption :
Budget GDP difficult to achieve
in Q1 201 :
deficit Tourism (+32,8 % ); FDI(+28,3%) * European debt crises
2012
45,9 % * Sustainable level * Exchage rate depreciation
Public GDP * Acceptable debt terms
Debt 2012 (Interest rate/maturity/ Currencies )
* High current account deficit
5,4 % * Core inflationary stability * Exchange rate depreciation
Inflation Q1
* Sharp food price increase * « Second-round effects »
* Lowest « Investment grate
* Acceptable ranking
rating BBB - compared with regional
»
* Current account deficit (2,3 %)
competitors * Budget deficit : 6,6 % (2012)

16. 1 - Revolution outbreak main reasons
2 - Tunisian economy and the « revolution choc »
3 - The challenges of democratic transition in Tunisia
4 - Preliminary assessment of the Tunisian economic
situation
5 - Conclusion
16

17. Economic Political
transition transition
17

18. New development model Revolution requirements
Is the current islamist goverment able to change the
developmental model ?
Modernise its Stick to
political speech radical speech
Enlarge its popularity Shrink its popularity
Starting with essential Answering populists
reforms demands
Switch to a new Keeping the
development model old development model 18

19. Thank You