The current-account deficit will balloon to 14.2% of GDP in 2011, 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 the first two months of the year were 9.3% higher in local-currency terms than in the same period of 2010, and imports were 2.6% higher. However, the exports reflect goods already manufactured and in the export pipeline; export data going forward will give a better indication of the impact on foreign trade of the protests. The current account will remain in deficit over the forecast period, with the shortfall averaging 12.7% of GDP in 2011-15. We expect exports to fall by almost 5% 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, and imports will exceed 2008 levels in 2012. 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 widen in 2011 as the second downgrade by Standard & Poor's, a credit-rating agency, will increase Tunisia's cost of borrowing. The income deficit is forecast to remain broadly stable thereafter, at an average of around US$2.4bn. 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 grows. Remittances into the country will decline quite substantially in 2011 owing to the civil war in Libya.