Tunisia Under Double Pressure from Global Crises
A report on the economic situation in Tunisia, published by the Arab Institute of Business Leaders (IACE) in the spring of 2026, paints a dire picture. The war in Iran, trade tensions between major powers, and a slowdown in Europe have combined to create a triple shock that threatens to reduce Tunisia's growth to 1% this year, down from 2.5% last year, and widen its budget deficit to 16 billion dinars, or 8.5% of GDP.
Tunisia's economy, already weakened by years of instability, is now at a crossroads. Since the outbreak of the war in Iran in late February 2026, the price of oil has surged to $100 a barrel, while the government's budget was based on an assumption of $63 a barrel. The gap is significant: each dollar above this threshold generates around 164 million dinars in additional subsidy costs for fuel. Over the course of the year, the total cost of this oil shock is estimated to be 6 billion dinars, plus the increased cost of imported cereals, whose prices are partly tied to oil prices. As a result, the budget deficit is expected to rise from 11 billion dinars, as initially forecast, to 16 billion dinars, or 8.5% of GDP.
This oil shock is taking place against a backdrop of already heightened international tensions. Since Donald Trump's return to the White House in November 2024, the United States has launched a trade war that has had destabilizing effects on global trade. Europe, Tunisia's main trading partner, is also experiencing a pronounced slowdown, with inflation rising to 2.8% in March 2026, a full point above initial forecasts. For a country that exports heavily to the Old Continent and imports almost all its hydrocarbons, the convergence of these three crises represents a shock of a magnitude comparable to that of 2022, when the war in Ukraine broke out, but with even tighter margins for maneuver.
The Impact on Daily Life
Inflation, which had fallen to 5.3% in 2025 after a surge in previous years, is expected to rise again to between 6% and 7% by the end of the year. The government is maintaining its subsidies on fuel and basic food prices, which has helped to preserve the purchasing power of low-income households. However, this safety net comes at a high cost to public finances and cannot be sustained indefinitely without consequences for other areas of spending, including public investment.
For businesses, the situation is also worrying. To finance its record budget deficit of 16 billion dinars, the government will have to borrow heavily from banks and the central bank, absorbing a significant portion of available liquidity in the financial system. In practice, this means that fewer credits will be available to entrepreneurs who want to invest or to households that want to borrow. A telling indicator of this disconnection between finance and the real economy is the Tunis Stock Exchange, which rose by 34% in 2025 and 19% in the first four months of 2026, not because companies are doing better, but because investors, lacking productive alternatives, are turning to speculative trading.
Positive Signals, but No Cause for Complacency
Not everything is bleak, however. Tourism is providing an unexpected boost: receipts rose by 4.4% in the first four months of 2026 compared to the same period last year, driven by Tunisia's image of security and competitiveness. Remittances from Tunisians living abroad also increased by 4.2% over the same period, supporting the balance of payments. The country's foreign exchange reserves now cover 105 days of imports, up from 98 days a year ago, thanks in part to measures imposed by the central bank on non-priority imports since March 2026.
These positive developments are not enough to reverse the trend, however. The monthly trade deficit surged to 2.5 billion dinars in March 2026, almost double the average of the previous two months, due to the increase in energy imports. If nothing changes, foreign exchange reserves could decline by around a quarter by the end of the year, a level insufficient to reassure international creditors facing a short-term external debt that already accounts for 38% of the country's total external debt.
Expert Recommendations
In the face of this situation, the Arab Institute of Business Leaders is calling for action on two fronts simultaneously. In the short term, authorities should support struggling businesses by offering them delayed repayment of credits, similar to what was done during the COVID-19 pandemic. Exceptional financing at favorable terms could also be granted to the most affected sectors, such as construction or small and medium-sized enterprises that export. In the medium term, the crisis offers a window of opportunity to implement long-delayed reforms. The exchange control code, which is being modernized in parliament, still hinders the entry of foreign exchange and complicates the lives of foreign investors. Large investment projects, planned for years, are still pending decisions: the exploitation of phosphate deposits in the southwest, the development of solar and wind energy with exports planned for Italy, or the modernization of port infrastructure. These projects, which could create jobs and generate foreign exchange, could gradually transform an economy too dependent on imports and too exposed to global shocks. The crisis, severe as it is, can also be the trigger that the country has been waiting for.
