Kais Saied's Grip on Tunisia: Economic and Political Costs
Introduction
Following the Arab Spring in 2011, Tunisia's successive governments failed to address long-standing economic issues, paving the way for a wave of populism. In July 2021, President Kais Saied seized power, prioritizing the concentration of power rather than economic reforms.
Economic Performance
- Economic Growth: Since 2021, Tunisia's economic growth has been weak, with the country recording its second-lowest growth rate (0.4%) in 2023, after a record low of -6.1% in 2020 during the early stages of the coronavirus pandemic. The International Monetary Fund (IMF) projects growth of no more than 1.6% in 2024.
- Investment: Investment has steadily declined since 2011, falling from 26% of GDP to 14% in 2023, with a record low of 13% in 2020. This has led to high unemployment, particularly among youth and university graduates, with youth unemployment reaching 39% and university graduate unemployment reaching 24% in 2023.
Fiscal Policy and Inflation
- Fiscal Deficit: Saied maintained a large fiscal deficit, averaging around 8% of GDP over the past three years, despite the economy's stagnant growth.
- Inflation: In 2023, high spending led to a record inflation rate of 9.3%, costing Tunisia nearly all its traditional sources of financing. The regime chose to monetize the fiscal deficit, exacerbating inflation.
Social Expenditures and Populism
- Social Spending: Since 2021, social expenditures (including subsidies and transfers) have risen to 12% of GDP in 2023, making Tunisia one of the highest spenders in the Middle East and North Africa region.
- Subsidies: Subsidies primarily cover petroleum products, electricity, gas, and cereals, with transfers accounting for around 5% of GDP. The sharp increase in subsidies was initially aimed at cushioning the impact of rising international food and fuel prices, but the trend continued into 2024.
Policy Choices and Their Impact
- Unreformed Subsidies: Saied's rejection of reforming the subsidy regime has fueled inflation and disproportionately affected the poor, who spend a significant portion of their household budgets on basic consumption.
- Targeted Safety Nets: The regime's focus on large social expenditures has been criticized for being both economically inefficient and socially unfair. Universal subsidies are fiscally costly and encourage overconsumption, while targeted social safety nets would be more effective.
- Middle Class Concerns: The middle class faces significant concerns about job scarcity and the poor quality of public services, which have become increasingly privatized and expensive. This has led to a situation where the middle class must pay for education, healthcare, and transportation, while the poor face underfunded and poorly equipped public services.
Long-term Risks
- Vicious Cycle: The current approach, driven by a combination of populist ideology and political calculations, has created a vicious cycle of rising deficits, reduced private-sector financing, inflation, decreased consumption, and worsening employment and social conditions.
- Public Discontent: The regime seeks to mitigate public discontent through large social expenditures, which drive up deficits further. This strategy is unsustainable in the long run and risks sparking social instability.
Conclusion
While Saied's populist policies have secured his reelection, they have come at a high cost, undermining the foundations of Tunisia's economy and inflicting social costs on the most vulnerable segments of the population. The regime's focus on maintaining the status quo through large social expenditures has been economically inefficient and socially unfair, risking long-term social and economic instability.