Libyan conflict slows Tunisian recovery

Lost revenues from the tourism sector is weighing on Tunisia's economy and stock market as the conflict in neighboring Libya unfolds.

Tunisian stocks are struggling to recover following the ousting in January of the president Zine El Abidine Ben Ali as the conflict in neighbouring Libya weighs on its economy.

Fighting in Libya between Muammar Qaddafi's forces and rebels has cost Tunisia US$1 billion to $2bn this year in lost tourism revenue and trade with its North African neighbour, said Haifa Belghith, an analyst at Amen Invest, a brokerage based in Tunisia. Tourism may recover within six months, or next year, depending when peace returns, she said.

Tunisia's benchmark, the Tunindex, has declined almost 14 per cent to 4412.59 points in the past six months. While investor confidence is slowly recovering, the index and most sectors appear to be in negative territory, she said.

"The civil war has had a negative effect on the Tunisian economy. Algerians and Libyans have not come this summer, which has affected tourism revenues," Ms Belghith said.

"For Algerians, people are afraid or cautious because of Tunisia's stability post the revolution and before the elections. For Libyans, they have their own issues to deal with."

A caretaker government has been trying to restore stability in Tunisia since Mr Ben Ali was forced from power by protests over unemployment, high food prices and political repression. The country was set to have its first fully democratic elections last month, but this was postponed to October 23 to allow more time for new political parties to register and make sure Tunisians had valid identity cards to carry their ballots.

Standard & Poors Ratings Services (S&P) last Thursday lowered its outlook on Tunisia to negative from stable on concern a prolonged political transition may lead to a drag on growth and public services. S&P kept Tunisia's foreign currency at "BBB minus", the lowest investment grade.

"The economic recovery depends largely on how quickly tourism and foreign direct investment flows recovery," S&P said. Mustapha Kamel Nabli, the governor of the Tunisian central bank, last month said the country had secured about $1.4bn from multinational organisations this year and needed another $1bn.

Published: August 2, 2011 04:00 AM


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