Economic performance
After a year characterized by strong and broad-based growth and a narrowing external current account deficit, the economic situation in 2005 remains very promising. A continued recovery of the services sector should offset the return to a normal level of agricultural production and the weak activity in the textile sector following the expiration of the Multifibre Agreement. The weakness of these sectors will likely temper exports growth an, in a context of revived domestic demand, there should be a slight worsening of the current account deficit. The overall balance of payments, which had a record year in 2004, should continue to register a surplus in 2005, while inflation should remain subdued.
The strong balance of payments performance has produced excess liquidity in the banking system. In this context, the monetary policy has remained prudent by appropriately absorbing a great deal of this liquidity. The increased flexibility of the dinar also continues to serve the economy well.
Fiscal consolidation efforts continued in 2004, despite difficulties related to high oil price and a weakness in tax collection. The budget deficit as a share of GDP narrowed substantially and the public debt to GDP ratio decline by one percentage point to 59,5 percent.
The 2005 budget target is compatible with the authorities' objective of bringing the public debt below 50% of GDP over the medium term. A lower-than expected fiscal deficit could also help control any eventual pressure from domestic demand and balance of payments surpluses.

Economic outlook
The Tunisian government has made progress in implementing the reform programme, both in the areas of macroeconomic and structural policies. The macroeconomic environment is now propitious for accelerating this programme which is key to attaining the medium-term objectives of the government.
Macroeconomic policy reforms would help reduce existing vulnerabilities in order to facilitate Tunisia's integration into the global economy and consolidate the foundations for sustained strong growth. This is turn would lead to lower unemployment and, in the long run, bridge the per capita income gap with emerging OECD economies. These reforms would be more costly to implement in a less favourable economic context.
However, a number of risks weigh on the economic outlook: a possible weakening of Europe's economic recovery, the expiration of the Multifibre Agreement and a potential deterioration of the regional situation. Nevertheless, the macroeconomic scenario for 2005 is based on an upward revision of the balance of payments projects. The spillover effects of the bumper crop in 2004, together with the continued recovery of tourism and the increased consumer confidence, could further stimulate domestic demand.
An environment that could continue to generate considerable balance of payments surpluses could present an opportunity for early repayment of the external debt. Efforts to strengthen the banking sector are underway as progress in this area is crucial to support the development of the monetary policy framework, to contribute to the liberalization of the capital account and to lower the financing costs in the economy. The authorities started as planned to liberalise external capital flows through a limited opening of the Tunisian Treasury bill market to non-residents and by facilitating foreign borrowing by residents. Other important measures were taken to develop the exchange market. In particular, the requirement of foreign exchange revenues have been eliminated and foreign currency denominated accounts have been established for several categories of residents.
Progress has also been made in reducing customs duties and the number of tariff lines at the multilateral level, and the easing of customs procedures and technical controls on imports. These steps should in the coming years be further reinforced and commercial partnerships, both inside and outside the European Union, will limit the Tunisian dependence on a few European countries.
Trade liberalization is likely to take shape within the framework of the agreements with the World Bank, the European Union and the African Development Bank, for which preparations are at an advanced stage. Trade liberalization will be an important tool for improving the business climate, stimulate job creation and encourage the real- location of labour in response to structural changes in the economy.
According to the US Heritage Foundation, Tunisia is now ranked among globally liberalized economies.

Investment is free on several business fields, 96 per cent of the production is submitted to international competition, 87 per cent of producer prices are governed by market systems and a large programme to privatize public enterprises is launched. The second phase of this programme alone involved assets of more that 1,4 billion Tunisian dinar.

In 1991, Tunisia became one of the first Arab and African countries to connecto to the Internet, according to the Tunisian Internet Agency. The "Institut regional des Sciences Informatiques et des Telecomunications" in Tunisia was then connected with an IP connection with the "Institut National de Recherche en Informatique et en Automatique" in France. The Internet market in the country is advanced by regional standards and five private and seven public sector service providers served approximately 77,000 Internet accounts in the country by the end of 2002, a penetration rate among the highest in the Arab world.

Basic Economic and Financial Indicators, 2002-2005

Source.: International Monetary Fund

Source.: General Union of Arab Chambers of Commerce