A combination of prolonged civil and political unrest at home, civil war in Libya (an important source of workers' remittances and a market for Tunisian goods), continued sluggish growth in the EU and rising world commodity prices seem likely to cut growth sharply in 2011. This will put pressure on internal and external financial balances and foreign reserves, which could deteriorate rapidly in the coming months if economic activity does not return quickly to its normal level. Generally speaking, the Tunisian economy has been prudently managed and could cope with a temporary period of slowdown. Careful macroeconomic management has produced low to moderate fiscal deficits, manageable inflation rates, a falling external debt now equivalent to 50.3% of GDP and comfortable foreign reserves equivalent (in February) to 139 days of imports. However, rising expectations among the Tunisian public will generate irresistible pressure to spend more on social sectors and welfare. Such spending should be manageable if the economy recovers quickly; however, if the economic downturn is prolonged, the public finances, the balance-of-payments position and foreign reserves will weaken.

The budget deficit seems certain to rise sharply in the short term as tax revenue falls and social spending rises to meet popular expectations. The government has been besieged with calls to compensate firms damaged by rioting; to provide benefits to those who have lost work; to establish job-creation schemes; to invest in the deprived regions where the uprising began; and to raise public-sector wages. According to the governor of the Banque centrale de Tunisie (BCT, the central bank), Mustapha Kamel Nabli: "The great challenges we face today are social pressures. With the opening of the political system there is a lot of pressure to try to catch up in matters of wages and employment." Ultimately, more jobs and higher living standards can only result from faster growth, which in turn can only come about through the continuation of the market-oriented policies of the old regime. However, the government also faces the challenge of restoring public confidence in market reforms, such as privatisation, by showing that they can benefit everyone, and not just a few. Mr Nabli said: "Market reforms contributed to corruption ... but it's not going to be easy to go back on them, so we have to build trust [in them]." Nevertheless, a slowing of privatisation can be expected until the government has a more transparent, competitive bidding system.

The BCT said that banking liquidity had decreased in 2011, which had required the central bank to inject TD1.79bn (US$1.23bn) into the money markets in January and February. The BCT has also reduced the banks' reserve requirement from 7.5% to 5%, which will release some TD250m (US$170m) for them to lend to local businesses.