We have substantially revised up our forecast for the current-account deficit in 2011, to 8.6% of GDP, as we expect the current political uncertainty in Tunisia to have a negative impact on economic output, tourism revenue and foreign investment. Foreign trade has, so far, been resilient. Revised trade figures show that exports in January were only 1.2% lower in local-currency terms than in the same month of 2010, and imports 0.5% lower. However, these figures reflect goods already manufactured and in the export pipeline; export data for February and March will reflect production losses more clearly. The current account will remain in deficit over the forecast period, with the shortfall averaging 6.4% of GDP in 2011-15. We expect exports to fall by 10.8% in 2011 but to rise over the remainder of the forecast period. From 2013 onwards, Tunisian exports will grow strongly on the back of increased demand from the EU as growth in the euro zone improves. Strong domestic demand and economic development will result in an increase in imports, which will outpace that of exports, but imports will exceed 2008 levels only in 2013. The rise in imports will follow on from a shift in the export structure from low value-added sectors to high-tech sectors, which will rely on raw or semi-processed imports. The risk to these forecasts stems from an escalation in unrest in Tunisia.

The income deficit will increase significantly in 2011 as the second downgrade by Fitch, a credit-rating agency, will increase the cost of borrowing. The income deficit is forecast to remain broadly stable thereafter, at an average of around US$2.3bn. Companies will increase the repatriation of profits from 2012 onwards. The trade and income account deficits will be partly offset by a surplus in services. However, we forecast a decline in the surplus in 2011, owing to a fall in tourism receipts. We forecast that the services surplus will widen considerably from 2012 onwards as income from tourism, transport and outsourcing services grow. Remittances into the country will decline quite substantially in 2011 owing to the civil war in Libya, from which an estimated 70,000 Tunisian workers have fled.