A wave of panic has swept across the world’s stock exchanges, which have continued to plummet since March 8. Last week saw a significant drop for the exchanges in Paris (-5.75%), Frankfurt (-5.31%), London (-4.01%), Milan (-6.10%) and Sydney (-9.7%). The exchange in Tunis has also yielded to general panic, continuing its descent since last week. On March 16, the country’s stock market index, Tunindex, finished up the day in the red at -4.10%. In New York, the Dow Jones dropped 12.93% and the Nasdaq 12.32%. Specialists are talking about a crash of unprecedented proportions since the notorious « Black Monday » of 19 October 1987.

Photo credit: Ahmed Zarrouki

In its most recent report from March 20, the Organization for Economic Cooperation and Development (OECD) predicts recession on a worldwide scale, with global growth dropping from 2.9% (2019) to 2.4% in 2020. Even more alarming were statistics presented by economists during the United Nations Conference on Trade and Development (UNCTD): they foresaw a drop in the global growth rate, from under 2% down to 0.5% in the worst case scenarios.

A fortuitous drop in the barrel price

The Tunisian government’s 2020 budget was based on a barrel price of around 65 dollars. With the drop in oil prices, however, on March 16 that number landed at 29.41 dollars. Hydrocarbon subsidies make up 45% of the country’s Compensation Fund budget, with Tunis importing nearly 40% of its energy needs. A decreased barrel price is fortuitous for state revenues, which will enjoy a budget decrease for hydrocarbon subsidies as Minister of Finance Mohamed Nizar Yaïche explained. But the perk is not all that COVID-19 brings to the economy; in an interview published in El Maghreb on March 8, Prime Minister Fakhfakh predicted a decrease in the country’s growth rate from 1.5% to 1%. Fakhfakh considered the decrease inevitable in light of the negative growth anticipated on a global scale.

Prime Minister Elyes Fakhfakh during a ministerial conference concerning a plan of action against the Coronavirus, 16 March 2020. Photo credit: Ahmed Zarrouki.

Crisis management

In the meantime, heightened consumer demand for certain products has impacted their availability in the market. This is the case for garlic, hydro-alcoholic gel and medical masks for which high demand has also caused a spike in their prices. The Minister of Commerce recently intervened to standardize the retail price for hydro-alcoholic gel. The past couple of weeks have seen a frenzy for food products such as pasta and flour that has resulted in a shortage of these items in some businesses.

In his speech on March 13, Fakhfakh assured the public that, « …storage and distribution circuits are operating normally in our country. There is no reason to be afraid or to panic ». Beyond the rush for certain hygienic and agro-food products, prevention measures implemented against the spread of Coronavirus include the cancellation of all cultural and sports events. These measures will not be without repercussions for the sectors of transport, hospitality and event planning.

Waiting line outside a pharmacy in the Belvedere neighborhood of Tunis, 17 March 2020. Photo credit: Ahmed Zarrouki

Tourism takes a hit

The consequences of COVID-19 have already been felt in the tourism sector, which constitutes about 14.2% of Tunisia’s GDP. Indeed, according to Jabeur Attouch, President of the Tunisian Federation of Travel Agencies (FTAV), the cancellation rate of reservations in Tunisian hotels has reached 45%. Attouch signaled the precarious situation in which travel agencies have found themselves owing to massive cancellation of bookings. In some cases, this has meant a 100% cancellation rate for clients coming from Asia and Europe. Limited flights to certain destinations and suspension of the Umrah pilgrimage have also been big hit for the airline Tunisair. CEO Elyes Mnakbi estimated the company’s losses to be 46 million dinars.

Deserted café terrasses on Avenue Bourguiba, 17 March 2020. Photo credit: Ahmed Zarrouki.

Chinese impact

China is a privileged trade partner with Tunisia. According to the General Management of Economic and Commercial Cooperation at the Ministry of Commerce, Tunisia’s trade deficit with China was 506 million dinars in January 2020. Constituting 30% of Tunisia’s global trade deficit, China is the main country responsible for Tunisia’s trade imbalance, followed by Algeria and then Italy. « We import many products from China: raw materials, machines, accessories, equipment, etc. The consequences of COVID-19 on trade exchanges are inevitable. Chinese production has been disrupted for weeks, as has the transport of goods to ports, plus maritime and air traffic », explained president of the Tuniso-Chinese Chamber of Commerce Karim Siala. Siala added that « The numbers are changing by the hour. For the moment, we are anxiously observing the situation ».

Photo credit: Ahmed Zarrouki

The Central Bank of Tunisia (BCT) is watching the situation as it unfolds with similar apprehension. Contacted by Nawaat, a source at the BCT indicated that the bank is on high alert for a potential crisis. « If sectors are heavily affected, decisions touching each one will be taken by political decision-makers. As for us, we have a crisis management plan. Sharing it will only trigger a further state of panic amongst economic and financial actors » our source tells us. As for the government, there has been no announcement of what measures will be taken for sectors hard hit by the crisis.