Low economic growth and a sharp rıse in public spending including wages, combined with delays in implementing key reforms have kept fiscal and current account deficits elevated. Unemployment remains high, particularly for youth, women, and in the interior regions. The national unity government — a coalition of the main political parties and social partners — was formed a year ago, to tackle the needed reforms, but identifying a first move has proven difficult.
Recent Developments
In 2016, the economy grew by 1.0 percent following a 1.1 percent in 2015, anemic for a middle-income country. Growth was driven mainly by the services sector (4.0 percent) while industrial output contracted by 6.6 percent and non-manufacturing industries (i.e., phosphate, oil) contracted by 1.9 percent, with extractives below historical levels due to social movements in mining regions. First-half 2017 growth was 1.8 percent, largely driven by the agricultural and services sectors which expanded by 3.8 percent each, while non-manufacturing industries contracted by 2.6 percent.
Inflation rose from to 5.6 percent (yoy) in July 2017 - with core inflation (which excludes food and energy items most of which have administered prices) rising to 6.7 percent due to the rise of imported goods and energy prices in line with the depreciation of the Dinar. In the face of these inflationary pressures, the Central Bank has increased its policy rate in two instances since April 2017 to 5 percent from 4.5 percent.
