July 31 (Bloomberg) -- Tunisia’s efforts to restore stability following the January ouster of President Zine El Abidine Ben Ali are being hampered by the economic impact of the conflict in Libya, the central bank governor said.
Fighting in Libya between Muammar Qaddafi’s forces and rebels has cost Tunisia $1 billion to $2 billion this year in lost tourism revenue and trade with its North African neighbor, Mustapha Kamel Nabli said July 29 in an interview in his office in his nation’s capital, Tunis. Tourism may recover within six months, or next year, depending when peace returns, he said.
“We are in the middle of it and we are concerned,” Nabli said. “What can you do? Just try to help and hope a political solution will be found and the conflict stops.”
Nabli disputed Standard & Poor’s July 28 negative assessment of Tunisia’s economic outlook, saying growth “is not collapsing.” S&P downgraded the country’s outlook to negative from stable on concern a prolonged political transition may lead to a drag on growth and public finances. S&P kept Tunisia’s foreign currency rating at BBB-, the lowest investment grade.
“The capacity of Tunisia to reimburse its debt is much stronger than it was six months ago,” Nabil said. “The political track is well defined; the economy has a low growth rate but the fundamentals continue to be strong.”
Aside from tourism and phosphate production, many Tunisian industries are expanding, including manufacturing and exports, he said.
Growth is expected to be between 0.5 percent and 1 percent this year, and Tunisia’s current-account deficit will be about 3 percent to 3.5 percent of gross domestic product, Nabli said. S&P said Tunisia’s current-account deficit will worsen to more than 6 percent of GDP in 2011, and that it expects economic expansion of 1 percent this year and a gradual return to growth of about 5 percent by 2014.
A caretaker government has been trying to restore stability since Ben Ali was forced from power by protests over unemployment, high food prices and political repression. National elections were postponed until October from this month to allow more time to organize the vote.
Ben Ali, whose ouster helped inspire uprisings across the Middle East and North Africa, was sentenced July 28 in absentia by a Tunisian court to 16 years in prison on charges that include the abuse of power. The ex-president is in Saudi Arabia.
The central bank chief said Tunisia is recovering from economic damage done under Ben Ali. Six percent of the credit in the banking system was going to companies linked to the former president, Nabli said.
“They handicapped the economy,” Nabli said. “Now those companies are returning to the ownership of the state and we hope this will open new avenues for growth.”
The central bank cut the benchmark interest rate last month by 50 basis points to 4 percent.
“We think this level is appropriate now,” Nabli said.
He said Tunisia won’t be seeking assistance from the International Monetary Fund. Nabli said last month that the country had secured about $1.4 billion from multinational organizations this year and needs another $1 billion. Among the funding pledges were $500 million from the World Bank in May and $500 million from the African Development Bank in April.
--Editors: Heather Langan, Karl Maier
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