Tunisia - Memorandum on current economic developments

R S T R C T D r Report No. EMA-8 i . I This report was prepared for use within the Bank and its affiliated organizations. | They do not accept responsibility fo'r its accuracy or completeness. The reoort may I not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION TUNISIA MEMORANDUM ON CURRENT ECONOMIC DEVELOPMENTS April 9, 1969 Europe, Middle East and North Africa Department  PREFATORY NOTE This memorandum updates the last Bank economic report distributed to the Consultative Group entitled "Current Economic Position and Prospects of Tunisia" (No. MA-3a, March 19, 1968). It summarizes the mai- derveinn+. in 1968R A nd cmmns oen the economic prospects for 1969 as presented in the Economic Budget. The meamnrnnrdlm as prepared by Mi4chael Pasonronr the basis of a mission to Tunisia from December 10 to December 20. A compre- haen.sive ren ei of the rNi,tisi4, F4 r Vea," mln 1069=19079 is pe- sently being made and will be distributed to the Consultative flrnru4 4 the S%,-er. Europe, Middle East and North Africa Department April 9. 1969  TABLE OF CONTENTS Page No. Production, Investment and Foreign Trade 1 Developments in 1968 1 Prospects for 1969 2 Internal Finance 4 Government Finance 4 Enterprises and Banks 6 External Finance 7 Conclusion 10 Statistical Tables Table 1 - Expenditure on Gross National Products 1 Q7- OAo Table 2 - Gross Bomestic Product by Sector, 1967-1969 Ta-Wle Fiqxed I.-westnum-t 1w Sector., 1 47 In4n Table 4 - Central Government Revenue and Expenditure, .L.7. I -.L7vJ7 Table 5 - General Government Revenue and Expenditure, Table 6 - Public Enterprise Saving by Sector 1967-1969 Table 7 - VIonetaxy Survey, 1967-1969 Table 8 - Balance of Payments, 1967-1969  Production, Investment and Foreign Trade Developm-ents in 1968 1.L L79J68 the growvhU L J t prutjdU Uby ULIV LJeVWVI-,1JULt:*Lvi 196U8 rcoULiVILLL Budget was in large measure achieved, as gross domestic product at factor cost increased by an estimated 8 percent in real terms. After two years of unfavorable weather conditions and poor harvests, output in agricul- 4-_ - - _A _ S a _ . __ . I - I I I 1. . ur-e aun relatedu industries, partlcularly wneat, olives ana olive oil, rose by 18 percent, and although remaining below the record 1965 level contributed over 40 percent to the growth in GDP. In the extractive industries, petroleum production rose sharply, as crude oil development proceeded more rapidly than expected, wrhile phosphate output was increased in anticipation of new marketing opportunities, mainly in Eastern Europe. Growth in industry apart from food processing and minerals was nominal, since declines in textiles and fertilizers largely offset the gains made in other branches. In the services sectors tourism continued its upward trend increasing by an estimated 22 percent. 2. At an estimated D118 million, total fixed investment in 1968 was 7 percent below 1967 and about D7 million less than forecast by the Eco- nomic Budget. Public investment declined by 11 percent, as the Government postponed local currency investment projects, while public enterprise investment was reduced by 25 percent. All sectors of the economy were affected by the public sector reductions, except transport and communica- tions and housing. Private investment rose by more than 20 percent, according to provisional estimates. The principal sectors concerned were agriculture, where there was a rise in foreign aid disbursements for the development of cooperatives, tourism and transport. Private investment in mining and manufacturinL is estimated to have remained at about the preceding yearls level, although there were substantial changes within the sector. In total. fixed investment is est imaed to have dreclined from 24 percent of gross domestic product in 1967 to 21 percent in 1968. 3. Despite the rise in production, merchandise exports did not grow in 1968 mainly because the Jncremrnt.al output of cereals And a larger share of crude oil were consumed domestically. Exports of olive oil went up but seasonal fatonrs causedr citys production and exports to fnll, while wine2 fertilizer, and iron ore were adversely affected by world market conditioitn. Moreopve on +.he basis of 11 mon+hs trade fignes it is Qikely that the rise in phosphate exports expected by the Tunisian authorities will be reali . *errce receipts rose by D. r due' to 4h in torst LWIJ~- LJ. ) 4I.L.L.LJ_.L.l L'J.U V rL 6JvL A Y~ LA.L VAJU.J. earnings and an advance in payments to the Government for use of the crude 4.~ ~ ~ ~ ~~~~~L ..e~.n =raendr,ebcd-,a a cco,,paniLed by a red-uct~