Download the report: Tunisia-CountryRiskReport

BMI, affiliated to the Fitch rating group, recently published its quarterly report for the second quarter of 2024, entitled “Tunisia Country Risk ReportIncludes 10-year forecasts to 2033”, offering an in-depth analysis of the economic and political situation in the country.
According to the report’s projections, real GDP growth in Tunisia is expected to show a slight improvement, rising from around 0.5% in 2023 to 1.3% in 2024. This increase is mainly attributed to a slight increase in household consumption, controlled growth in imports and a moderate easing of pressures on government liquidity.
The report offers a comprehensive analysis of political, financial and economic risks, including BMI’s fundamental points of view, 10-year forecasts, the economic risk index, the political stability and risk index, the long-term political outlook, the SWOT analysis and detailed sections on the structural economy.

Source: OECD

The Organization for Economic Cooperation and Development (OECD) publishes a semi-annual report on international direct investment (IDI) in the world.

The October report focuses on the main findings of IDI in the 1st half of 2023 on an international scale. Essentially, the following emerges.

• Global FDI flows rebounded to reach USD 727 billion in the first half of 2023, but remained 30% below the levels recorded in the first half of 2022. A large part of the increase occurred in the first quarter of 2023, despite a decrease in global IDI flows of around 44% during the first half of 2023 compared to the 2nd quarter of the current year.

• IDI flows to the OECD area have increased to USD 275 billion, but they are 42% lower than their levels recorded in the first half of 2022 and lower than the half-year levels of 2021. They rose to positive levels in the first quarter of 2023, but then fell by 58% in the second quarter. This is largely explained by the decrease in equity inflows and reinvested profits, reflecting the continued slowdown in new investment activities.

• Outbound flows from the OECD area have more than doubled compared to the 2nd half of 2022, to reach USD 580 billion, although they are lower than the levels of the previous half-year. Here too, much of the increase took place in the first quarter, while IDI outflows from OECD countries fell by 56% in the second quarter.

• IDI flows to non-OECD G20 economies fell by 15% in the first half of 2023. They decreased by 13% in the first quarter and by an additional 27% in the second quarter.

The United States was the first IDI beneficiary in the world, followed by Brazil while Canada and Mexico, rank tied for third among IDI beneficiaries.

The United States was also the main global investor, followed by China and Japan.

• The cross-border mergers and acquisitions activities carried out continued their downward trend in a weakened economic environment, impacted by high prices, rising interest rates and persistent geopolitical uncertainty. The value of completed transactions fell by 23% in advanced economies and by 49% in emerging markets and developing economies.

• Capital expenditures on new investment projects announced remained strong in emerging markets and developing economies, partly thanks to a large renewable energy project announced in Mauritania, but the number of projects announced experienced a reduction.

Source: Euromonitor International

The Global Economic Forecasts is a quarterly publication produced by Euromonitor International, a world-renowned consulting firm that strives to provide information on upcoming trends in the international market in order to facilitate decision-making by companies and provide information on the identification of business opportunities.

At the beginning of the year 2023, the world economy has seen positive signs as inflation and energy prices decrease compared to their peaks reached. The end, by China, of its zero COVID policy also gives impulses to growth, although its full impact has not yet been deployed. Nevertheless, the global macroeconomic environment remains challenging for economies, businesses and consumers in the coming months.

The global economy is expected to grow by only 2.3% in real terms in 2023, the weakest growth since 1993, outside the recession years of 2009 and 2020.

The global economic outlook for 2023 is among the weakest in decades, with global real GDP growth expected to increase by 2.3% in 2023, down from the 3.3% recorded in 2022. Although global inflation is expected to moderate from 9.1% in 2022 to 6.8% in 2023, we are still facing historical peaks. The high cost of living, rising interest rates and persistent geopolitical uncertainties will continue to weigh on private consumption and investment in many regions of the world, undermining global growth prospects.

Advanced economies are close to recession in 2023

Recession fears have intensified in advanced economies as their growth prospects have steadily deteriorated over the course of 2022. Despite higher expectations in the last months of last year, advanced economies are expected to experience stagnant growth in 2023.

Indeed, the impact of the constant rise in prices and that of borrowing costs will generate additional decreases in the purchasing power of consumers as well as business investments, which will greatly slow down economic activity.

Basic forecasts of real GDP growth 2020-2024 Note

According to Euromonitor International’s basic forecasts for the first quarter

2023, US real GDP growth is expected to decline to 0.2% in 2023 and to 1.4% in 2024. This represents downward revisions of 0.3 and 0.1 percentage points, respectively, compared to the previous quarter’s forecasts. In addition to high inflation, the slowdown in growth in the United States is mainly the result of rapid interest rate increases by the US Federal Reserve aimed at controlling inflation. Their moderating effect on economic activity and private sector confidence will not be fully felt until 2023. An increasingly restrictive monetary policy will eventually weaken the robust labor market and strong consumer spending, and therefore also the main pillars that helped the US economy avoid recession in 2022.

For its part, the Eurozone economy is expected to grow by 0.2% in 2023 and by 1.6% in 2024. Milder than expected temperatures during the autumn and winter have led to lower energy prices and a reduced risk of a serious energy crisis.

Nevertheless, like the United States, the eurozone will be close to recession in 2023 against a backdrop of persistently high inflation levels and continuously rising interest rates. In addition, unlike the United States, the area will face persistent energy supply risks resulting from the war in Ukraine, an uncertainty that significantly affects businesses and consumers.

Mixed outlook for emerging markets

The economic outlook is expected to vary between emerging and developing markets. In China, after the low growth recorded in 2022, the reopening of the country and the end of the zero COVID policy in December 2022 should release pent-up demand and stimulate consumption and growth. However, the short-term outlook could be clouded by a resurgence of COVID-19 which is hampering economic activities. In addition, the weakening of external demand and the persistent problems of the real estate sector are major obstacles to China’s economic recovery in 2023. Thus, Euromonitor’s forecasts for China’s real GDP growth remain unchanged compared to the previous quarter, at 4.7% for 2023 and 4.9% for 2024.

Other Asian emerging markets, including India and some Southeast Asian countries, are still expected to outperform in 2023, but with a slower pace of growth compared to the previous year, as the decline in demand from the United States and Europe will affect the exports and services of these countries in certain sectors. Likewise, the slowdown in oil demand and the volatility of raw material prices will weigh on the growth prospects of the economies of the Middle East and Africa in 2023-2024.

Finally, in Latin America, economic growth is expected to remain moderate in the main emerging markets such as Brazil and Mexico in the short and medium term, given the tightening of monetary policies and political instability.

Inflation continues to slow down while multiple risks persist

In 2023, global inflation is expected to slow to 6.8% according to forecasts for the first quarter of 2023, after a multi-decade record of 9.1% in 2022. Despite the easing, emerging and developing economies will continue to record very high inflation at 8.1% in 2023 in a context of persistent pressures on energy and food prices.

In advanced economies, inflation will remain significantly above the trend at 5.2% in 2023

As for the advanced economies, inflation will remain well above the trend at 5.2%, as price pressures shift from energy, food and goods to become increasingly anchored in the service sectors.

Slowing demand and rising interest rates in most of the world’s economies will continue to weaken inflationary pressures during 2023.

However, multiple risks could lead to a resurgence of inflation in the short and medium terms. The immediate risks emanate mainly from new supply disruptions in the context of the war in Ukraine and the reopening of China, which could aggravate a generalized cost of living crisis. In the medium term, the aggravation of geopolitical tensions, the rewiring of global supply chains and the increasingly frequent extreme weather events present considerable inflation risks.

The Global Investment Trends Monitor is a quarterly publication produced by UNCTAD.

The new UNCTAD publication “Global Investment Trends Monitor” published in January 2023 provides an overview of global foreign direct investment (FDI) in 2022 and forecasts their prospects for 2023.

The main idea that emerges from the report is that the global dynamics of global FDI weakened in 2022 with a downward trend for all projects after the first quarter of the current year. Decrease also expected for 2023.

The multitude of crises on the world stage, in this case the war in Ukraine, the surge in food and energy prices, financial turbulence and debt pressures, have inevitably affected global foreign direct investment (FDI) in 2022.

As a result, the pace of the number of new investment projects, including announcements of new locations, financing of international projects and cross-border mergers and acquisitions, reversed after the first quarter of 2022.

Indeed, project financing and mergers and acquisitions have been particularly affected by the deterioration of financing conditions, rising interest rates and increasing uncertainty on the financial markets. Cross-border mergers and acquisitions decreased by 6% globally and by more than 50% in the United States, the largest M&A market. The value of international project financing fell by more than 30% in 2022.

Preliminary data on the announcements of new projects in 2022 still indicate a growth of 6%, thanks to the continuation of momentum in the first half of the year.

The values increased significantly (+54%) due to several megaprojects and the transition from project financing to corporate financing in the renewable energy sector, which led to an increase in the average size of the projects.

Investment trends in selected economies in 2022

• In the United States, the value of mergers and acquisitions, which normally represent a significant share of FDI flows, fell by 53%.

• In Europe, announcements of new projects decreased by 15%, with decreases in most major economies, with the exception of Italy (+11%).

• China recorded a 31% decrease in the number of new project announcements although the number of international project financings increased by 11%.

• India, for its part, was the rare exception to the general trend of gloom, with a doubling of new project announcements and a 34% increase in international project financing.

• The ASEAN economies (Association of Southeast Asian Nations) recorded a sharp decline in cross-border sales of mergers and acquisitions (-74%), which could translate into a decrease in the value of FDI for all these countries for 2022. However, announcements of new projects remained strong (+21%).

• In Brazil, the number of announcements of new projects increased by about a third, but international project financing operations decreased by 17%.

While the high number of entirely new megaprojects in renewable energies remains encouraging, the financing of international projects in the sector remains overdue Indeed, the number of projects in renewable energies has decreased by 5% and by almost 40% in value.

As a result, the overall international investment positively impacting climate change has decreased by more than 9% in terms of announced values and by 6% in the number of projects (Figure 2).

On the other hand, several major projects in the extractive industry (industries, coal, oil and gas) have been announced despite the context of the global energy crisis.

The prospects for global FDI in 2023

The prospects for international FDI in 2023 seem weak.

A large number of economies in the world are expected to enter recession and several factors may be the origin :

• negative or slow growth in many economies,

• further deterioration of financing conditions,

• investor uncertainty in the face of multiple crises and, in particular in developing countries,

• increasing risks related to the financial crisis associated with debt levels,

Source: EIU

The Economist Intelligence Unit publishes an annual report presenting the global outlook for six sectors: automotive, consumer goods & retail, energy, financial services, healthcare & pharmaceuticals and telecommunications. These analyses describe the growth prospects, the risks and the trends to be monitored in these six major sectors. They aim to provide companies with an overview of global trends, opportunities and threats that will affect their sector in the coming year.

1- General

Based on the observation that recent years have been turbulent for most companies, due to the pandemic, soaring raw material prices, high interest rates and political disturbances, the report questions the stability of conditions during the year 2024.

Geopolitical tensions and global warming will lead to new challenges for companies in 2024. Artificial intelligence, for its part, will bring new opportunities.

• Climate change will begin to have a noticeable impact on countries and companies. The sectors directly linked to the mitigation of this phenomenon, such as renewable energies and electric cars, and those that will have to adapt, such as air conditioning and healthcare, will see their demand grow, but insurers and governments will find it difficult to integrate the increasing risks associated with it.

• New regulations in the EU and the US mean that companies will have to closely monitor their supply chains to improve environmental, social and governance (ESG) reporting. However, skepticism in this regard will harden in the United States as the presidential elections approach in November.

• Business concerns about taxation will increase as the OECD introduces its global minimum tax rate. Governments will try to reduce budget deficits and national debt levels that have widened during the covid-19 pandemic.

• Geopolitical tensions between China, Russia and Western allies, as well as higher risks in the Middle East, will complicate the reactions of governments and companies to all this. Investments impacting value chains, in particular for technology and the energy transition, will adapt to minimize political risk.

• The increasing use of generative artificial intelligence will reshape companies and jobs. Despite some notable disruptions in sectors such as marketing,

the arts, business services and education, most companies will find ways to use AI to increase their productivity.

• Companies have experienced ups and downs in recent years as the pandemic, soaring commodity prices, high interest rates and political disruptions have generated good profits for many companies and bankruptcies for others.

• Most of these factors will persist until 2024 in a more discreet form, but remain accompanied by the acceleration component of climate change and El Niño (abnormally high water temperatures). The year 2024, predicted to be the hottest on record, will see minds focus on efforts to reduce greenhouse emissions and on restarting investments in renewable energies and electric vehicles.

• However, the various economic actors will not be able to achieve the ambitious objectives they have set for themselves on minimizing climate risks and the global use of fossil fuels will, paradoxically, have to increase.

In addition, the costs associated with managing climate change will become increasingly onerous, and not only for the sectors directly affected (such as airlines, healthcare, insurance and food production), but also for many companies and governments.

• We should expect an increase in reluctance within the EU, where emissions targets will require high costs for companies and will put a strain on their competitiveness. On the US side, attitudes will become even more polarized in the run-up to the November elections and stricter regulations on ESG reporting will add to the pressures of the situation.

• In 2024, OECD countries will embark on the debate aimed at encouraging the adoption of a global corporate tax rate of 15% as agreed in 2021. Although the EU and other countries will comply with it (the United States already has a 15% rate), some governments will continue to reduce their taxes to attract investment.

• Digital tax projects will be suspended, with the exception of those in Canada. For their part, emerging and developing markets such as India will also find it difficult to reduce their deficits without increasing tax levels.

2- Sectoral analysis

• Tensions will continue to affect technological investments, especially in the semiconductor, data processing and artificial intelligence (AI) sectors, with healthcare technology likely to be next on the list.

• Regulations and trade barriers will probably evolve rapidly, as companies, on an international scale, intensify their investments in AI in an attempt to benefit from recent developments in LLM models (computer language model with a large number of parameters).

• EIU experts predict disruptions in the markets related to these AI technologies as companies test tools and means to increase their productivity. However, large-scale job losses are not expected.

• As for the automotive sector, the demand for electric vehicles (EVs) will continue to be the only positive point in a very gloomy context.

It is expected that sales of electric vehicles will increase by 21% to 14.9 million units, more than five times their pre-pandemic level, while sales of passenger cars (including electric vehicles) and commercial vehicles will increase by only 3% and 1% respectively. China will account for more than half of global sales of electric vehicles and a similar share of global sales and exports of electric vehicles causing an escalation of trade tensions.

• For consumer goods and retail sales, global sales growth is forecast at around 6.7% in US dollar terms and 2% in real terms as inflation slows.

In this context, retailers will probably fare better than online sales companies, helped by bargain hunters and the continuous improvement of the tourism situation on a global scale.

• Energy consumption will accelerate in 2024, largely driven by Asian demand. Still high, fossil fuel prices will contribute to global demand reaching new records. For its part, the demand for renewable energy will increase by 11%, despite unresolved supply chain problems, still high financial costs and low auction prices.

• As for the financial services sector, banks and fixed income funds will continue to benefit from high interest rates and wider margins, but real estate investors will face more turbulence, especially in China.

Property insurers will stop covering areas subject to weather risks such as tropical storms, rainfall, floods and forest fires.

• Health spending will increase in real terms after two years of decline. Countries such as China and Egypt will work to expand access to care. However, resources will remain limited as governments try to reduce budget deficits and public debt levels while avoiding strikes in the health care sector. Pharmaceutical companies will face new regulations regarding manufacturing standards in India and EU market entry requirements.

• The technology sector will focus on investments in AI, but will have to contend with stricter regulations and increasing geopolitical tensions. Large semiconductor companies will continue to diversify in the West thanks to the large subsidies available, but (like other technology companies) they will face dilemmas regarding investments in China. Chinese technology companies will face their own dilemmas as they bypass trade restrictions in order to seek investment opportunities abroad.

3- Focus on 4 sectors

Automobiles in 2024: the transition to electric vehicles will accelerate, but Chinese domination of the sector will aggravate geopolitical tensions • The global automotive sector will be hit by slow consumer spending, high interest rates and the transition to electric vehicles. An increase in sales of passenger cars of 3%, and sales of commercial vehicles and buses of 1% is expected. • Slow progress is expected in approving legislation related to electric vehicles and greenhouse gas emissions in the run-up to the 2024 US presidential elections. • The EU Border Carbon Adjustment Mechanism, which will oblige importers of certain products to pay a carbon tax from 2026, began its transition phase in October 2023, with reporting scheduled for January 2024. The regulation will apply to materials such as steel and aluminum, which are essential for the manufacture of vehicles. Energy in 2024: Energy consumption will accelerate in 2024. Fossil fuels will continue to dominate, despite the growing demand for renewable energies • The growth of global energy consumption will accelerate to reach 1.8% in 2024, supported by strong demand in Asia despite persistently high energy prices. • Global demand for coal, gas and oil will reach record levels, which will hamper efforts to reduce emissions. High commodity prices will continue to stimulate investment in oil and gas production. • The dynamics of renewable energies will continue, with the combined consumption of solar and wind energy increasing by about 11% per year globally. Many countries will also hurry to produce more hydrogen • Hydroelectric production will remain low while climate change continues to lower water levels in many regions. Nuclear power will also be affected.

Health in 2024: Increasing spending in real terms will not allay concerns about the long-term sustainability of health systems.

After two years of decline, health spending will increase as inflation slows. However, resources will remain limited as governments try to reduce budget deficits and levels

of public debt while avoiding strikes in the health care sector.

Technologies and ICT in 2024: AI will be at the center of technological investments but will face geopolitical and regulatory challenges • Investments in AI will increase in 2024 as more companies go beyond experimentation and begin to discover real use cases. However, the main impact of technology is likely to be felt on politics, especially in the United States and other countries facing elections.

• Pharmaceutical expenses will also increase in 2024, as drug prices continue to rise sharply, despite efforts to regulate them. Drug manufacturers are facing new regulations related to manufacturing standards in India and EU market entry requirements. • Climate change will threaten human health and health systems as heatstroke and natural disasters multiply. Healthcare providers and pharmaceutical companies will come under more pressure to reduce their contribution to global emissions. • Digital health will further develop, with investments in artificial intelligence offering new opportunities. Regulators will strengthen oversight of data access and privacy, as well as AI ethics, while investors will push for more sustainable business models. • The main semiconductor companies will continue to diversify in the West, due to geopolitical concerns and the large government subsidies available. • Regulators will strive to keep up with the evolution of AI, with the EU trying to play a leading role in the development of this technology. Other areas, such as data, privacy and competition, will also be examined. • The geopolitical battle over technology between the United States and China will continue and its ramifications will affect many other countries.

Source: OECD

The World Economic Outlook is an IMF survey published usually twice a year. It presents the analyses of the economists of the IMF staff on the evolution of the world economy in the short and medium term.

World economic outlook

The global economic prospects for 2023 are deteriorating and subject to strong risks. Growth is being held back by rising rates in the face of inflation, the recent financial deterioration, the war in Ukraine and the fragmentation of the world economy amid geopolitical tensions. If, at the outset, the hypothesis adopted revolved around financial tensions, global growth would be the weakest recorded since 2001, excluding the crises of 2008 and 2020.

Anticipation of a fall in global growth in 2023 followed by a slow recovery

In the central scenario of the World Economic Outlook, the IMF expects global economic growth to decline to 2.8% in 2023, then 3.0% in 2024, after 3.4% in 2022. This slowdown would be particularly marked in advanced countries (1.3% in 2023 and 1.4% in 2024, after 2.7% in 2022), especially in Europe. GDP would decline in Germany and the United Kingdom (-0.1 and -0.3% respectively in 2023) and would grow slightly in France and Italy (0.7%).

These non-reassuring prospects are explained by the monetary tightening necessary to fight inflation, the recent deterioration in financial conditions, the continuation of the war in Ukraine and the increasing fragmentation of the world economy for geopolitical reasons in particular.

Global inflation would fall to 7% in 2023 under the effect of lower commodity prices, but its underlying component (excluding food and energy) would decrease more slowly. In total, inflation would not reach its target until 2025 in most countries. It could also prove to be more persistent than expected in the central scenario.

According to the reference scenario, the recent financial tensions would be contained, but it is also plausible that they will increase. In this case, global growth would be even lower, both globally (2.5% in 2023, the lowest rate for two decades excluding the 2008 crisis and the Covid crisis) and in advanced countries (less than 1%).

Source: https://fashionunited.uk/

Tunisia has long held a distinguished reputation for its excellence in the manufacturing of high-quality apparel. Positioned in close proximity to the European Union (EU), the Tunisian apparel industry has harnessed its expertise to meet the stringent quality standards set by the EU. This well-established industry has been pivotal in elevating Tunisia as a leading player in the global apparel market.

However, the landscape of the apparel industry is constantly evolving, with EU legislation undergoing rapid changes, especially in response to the increasing legal demand for circular textiles. This crucial shift in consumer and legislative expectations requires a transformation within the Tunisian apparel sector, aligning it with the new demands of the EU market.

Recognizing this imperative need for adaptation, the CBI (Centre for the Promotion of Imports from Developing Countries) has unveiled a ground-breaking initiative. In collaboration with Forward in Fashion. CBI has launched a comprehensive four-year program designed to facilitate the transition of the Tunisian apparel industry towards a circular industrial framework, harmoniously aligning it with the evolving EU requirements.

This pioneering program includes several crucial dimensions. Not only will it serve as a guiding beacon for the Tunisian industry, leading it towards sustainable practices and circular production, but it will also foster international collaborations by bridging the Tunisian apparel sector with global recycling innovators. This strategic partnership aims to include fresh ideas and technologies into the industry, enhancing its competitiveness on the world stage and fostering global sustainable practices within the Tunisian apparel domain.

The prospect of the Circular Tunisian Apparel Manufacturing Industry is not only an exciting development for Tunisia itself but also an opportunity for international stakeholders looking to explore this transformative sector. We extend a warm invitation to all interested stakeholders, be it entrepreneurs, innovators, or industry professionals, to engage with us and explore the dynamic landscape of the Tunisian apparel industry within the world of circular apparel. This is a rare occasion to be at the forefront of an industry in transition, and your participation will not only help shape the future of Tunisian apparel but also contribute to the broader shift towards a more sustainable and circular fashion ecosystem.