Fitch: Tunisian Political and Economic Uncertainties Keep Ratings Under Pressure
Fitch Ratings says in a new report that political and economic uncertainties are havinga negative impact and keeping Tunisia's ratings under pressure.
Source : https://www.marocafrik.com/english/Fitch-Tunisian-...
Social and political unrest has undermined Tunisia since March 2012, when Fitch affirmed its Long-term foreign currency Issuer Default Rating (IDR) at 'BBB-' and Long-term local currency IDR at 'BBB' with a Negative Outlook.
Fitch remarks that this assessment was based on the hope of a smooth political transition in 2010-2011 with the expectation that 2013 elections would bring comprehensive reform and limit refinancing risks for public debt, thanks to the high international support granted by multilateral and bilateral creditors.
Since March, it says that social unrest has surged, with highly visible violence which it says is mostly attributable to Salafi elements which undermine the safety of the country's political transition, Fitch says. It notes several instances of tension between the government coalition partners. and the National Constituent Assembly (NCA) has experienced delays in the drafting of the constitution resultingin a possible delay of elections.
Although Fitch maintains the view that a smooth political transition will prevail,social and political tensions could undermine tourism and investment, notably foreign direct investment (FDI). Neither tourism nor FDI, two pillars of growth and foreign currency generation, have recovered to pre-crisis levels,it notes.
Fitch has also revised down its real GDP growth forecasts to 2.5% and 3.5% for 2012 and 2013 respectively, to reflect its more pessimistic view of prospects for the eurozone (Tunisia's main trading partner) and the weakness of both private and public investment. The agency now expects the budget deficit to reach 6.8% of GDP and the current account deficit 7% of GDP in 2012.
Net external financing needs are in excess of USD2bn,Fitch says. It notes that some funds have already been secured by official bilateral and multilateral financing but it thinks that financing the budget deficit will be increasingly challenging. This is made worse because the banking sector requires heavy recapitalisation of at least 3% of GDP and as much as 7% of GDP in an adverse scenario, according to the IMF.
Fitch remarks that this assessment was based on the hope of a smooth political transition in 2010-2011 with the expectation that 2013 elections would bring comprehensive reform and limit refinancing risks for public debt, thanks to the high international support granted by multilateral and bilateral creditors.
Since March, it says that social unrest has surged, with highly visible violence which it says is mostly attributable to Salafi elements which undermine the safety of the country's political transition, Fitch says. It notes several instances of tension between the government coalition partners. and the National Constituent Assembly (NCA) has experienced delays in the drafting of the constitution resultingin a possible delay of elections.
Although Fitch maintains the view that a smooth political transition will prevail,social and political tensions could undermine tourism and investment, notably foreign direct investment (FDI). Neither tourism nor FDI, two pillars of growth and foreign currency generation, have recovered to pre-crisis levels,it notes.
Fitch has also revised down its real GDP growth forecasts to 2.5% and 3.5% for 2012 and 2013 respectively, to reflect its more pessimistic view of prospects for the eurozone (Tunisia's main trading partner) and the weakness of both private and public investment. The agency now expects the budget deficit to reach 6.8% of GDP and the current account deficit 7% of GDP in 2012.
Net external financing needs are in excess of USD2bn,Fitch says. It notes that some funds have already been secured by official bilateral and multilateral financing but it thinks that financing the budget deficit will be increasingly challenging. This is made worse because the banking sector requires heavy recapitalisation of at least 3% of GDP and as much as 7% of GDP in an adverse scenario, according to the IMF.
Source : https://www.marocafrik.com/english/Fitch-Tunisian-...