Tunisia, a small North African country located south of Sardinia on the Mediterranean Sea, has been blessed with many of the attributes that lend themselves to a successful tourism sector: a long stretch of coastline, a warm climate, proximity to wealthier yet cooler countries, and reasonable costs. However, it has not been blessed with good luck.
Since sparking the Arab Spring revolutions that rippled across the region in 2011, Tunisia has found itself in the crosshairs of terrorist groups and had to fight sluggish economic growth while making the worthy but difficult political transition from dictatorship to democracy. After previously flocking to its shores in relatively large numbers, foreign visitors were scared away from the country after a pair of deadly terror attacks in 2015 targeted tourist areas.
By 2019, they were coming back in their droves — with nine million visiting that year — and expectations were high for a full return to health for Tunisian tourism. Then Covid-19 hit.
Tourism is a prolific global generator of jobs and revenue. A rising tide in tourist traffic in recent years had lifted many boats, economically speaking. What happens when it stops? The world is about to find out. The UN World Tourism Organisation expects an overall decline of 20% to 30% in international arrivals in 2020 compared with last year. This is problematic for any country with a previously thriving visitor economy – for some, it can be completely catastrophic. Tourism authorities worldwide are now scrambling to adjust to the sudden reversal of fortunes.
Mohamed Ali Toumi – appointed minister of tourism and handicrafts in February 2020 following lengthy efforts to form a government that dragged on since the October 2019 elections – had to confront an unenviable in tray upon taking up his new portfolio. “In Tunisia at present, most bookings have been postponed. The survival of the tourism activity during this year depends on the duration of the crisis,” he says. “Tourism is a cross-cutting sector of vital importance for the Tunisian economy. Its knock-on effect on other sectors remains considerable.”
Tourism represents about 14% of national GDP and provides nearly 500,000 direct jobs and 1.5 million indirect jobs, according to the minister. The stakes are high, and the collapse in tourism comes at a time when economic headwinds were already not blowing Tunisia’s way. The size of the economy had reduced from $47.6bn in 2014 to $39.9bn in 2018, according to the World Bank. GDP growth declined from 2.5% in 2018 to 1.6% in 2019 and the country has been plagued by high inflation, large fiscal deficits and bloated public debt. Although pre-Covid-19 projections for future growth were modestly encouraging, the government has slashed its growth forecasts for 2020 from 2.7% to a dire 1.0%. The unemployment rate was already hovering around the 16% mark before tourist-reliant companies started the inevitable shedding of jobs.
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The crisis will test the mettle of the newly formed government, led by Prime Minister Elyes Fakhfakh, and strain its fiscal resources.
“The economic repercussions of the Covid-19 crisis will be felt particularly acutely in countries such as Tunisia where the state’s ability to directly support businesses is limited. Targeted and rapid policy responses, formulated in coordination with the private sector, will be important to making a tangible and timely difference to the business community,” says Raymond Asfour, CEO of Expectation State, an advisory that aims to improve investment-related governance and decision-making in emerging states.
“The government has been mobilising international support, including but not limited to the IMF. It should ensure that this support is targeted towards sectors and areas where it will have an outsized impact on the country’s recovery,” he adds. On 10 April, the IMF approved emergency financing of $745 million under its Rapid Financing Instrument to help the Tunisian authorities cope with the pandemic.
For its part, the government has announced a first batch of support measures for tourism, including guarantees for short-term loans to cover operating expenses of tourism companies. Additionally, tax and social contribution payments have been deferred for three months; water, electricity and phone services are protected from being cut off for two months; and tax and customs debts have been rescheduled for seven years. There is also the possibility of VAT refunds within a maximum period of one month.
More far-reaching measures will be needed in order to safeguard the sector for the long term, however, Toumi acknowledges. “[We need] to restructure both the tourism and the handicraft sectors in order to strengthen their global position,” he says. These longer-term goals include streamlining investment procedures, encouraging public-private partnerships, diversifying Tunisia’s tourism offering, strengthening worker skills and qualifications, and attracting more international hotel brands.
“We are very closely monitoring this pandemic in order to define the future directions to be taken. We will also continue to attract foreign direct investments. The day coronavirus ends, we will be ready to welcome new investments,” Toumi says.
Asfour believes the crisis could serve as a catalyst for deeper reforms to the Tunisian economy and improvements to the business environment, to the ultimate benefit of more than just the tourism industry. “In response to the crisis the government has adopted some digital solutions, including movement authorisations and [the processing of] SME requests for government support. The same urgency needs to be carried into ongoing efforts to modernise public administration and services for investors and the domestic private sector,” he says. “If these measures can be adopted at a time of crisis, similar measures can surely be adopted when it’s business as usual.”