Outlook for 2011-15

• It is uncertain whether the third interim government will be able to maintain security, even though it has been stripped of all members of the former ruling party, the Rassemblement constitutionnel démocratique (RCD).
• The political situation in Tunisia is likely to remain volatile if the interim government does not implement measures to create jobs and increase wages. There is a high risk that civil unrest will continue.
• The interim government plans to hold an election for a national constituent assembly on July 24th. The assembly will be responsible for rewriting the constitution and organising parliamentary and presidential elections.
• Islamist parties will try to secure a position in Tunisian politics and government but will be competing against a plethora of new political parties, which have recently been licensed, as well as existing parties.
• We expect government expenditure to increase substantially as the interim government implements measures to boost economic growth. With revenue sources declining, the budget deficit will widen to 9.5% of GDP in 2011.
• We estimate that real GDP growth in 2010 was 3.4%. We have revised down our growth forecast in 2011 to 0.8%, in line with government projections. Growth in 2011-15 is forecast to average 3.1%.
• The protests will have a negative impact on tourism revenue and trade, causing the current-account deficit to balloon in 2011 to 14.2% of GDP. The current account will remain in deficit over the forecast period, averaging 12.7%.

Monthly review

• Political protests have subsided since end-March but have been replaced by economic unrest, which has increased considerably.
• Attempts to remove the influence of the RCD have continued as those closely associated with the former president have been detained.
• Ties between Tunisia and Italy have come under strain as more than 20,000 Tunisians have entered Italy since the start of protests in December 2010.
• The interim government has unveiled an action plan to boost growth.
• Increased government spending driven by emergency measures to revive the economy has worsened the government's fiscal position.
• The employer's association, UTICA, has estimated that the two months of protests since January 14th have cost businesses TD400m (US$280m).
• Exports for the first two months of 2011 have increased, but industrial production has fallen.

Tunisia faces a period of instability following the ousting of the president, Zine el-Abidine Ben Ali, in mid-January as a result of a popular uprising. It is unclear whether the third interim government, which was put in place on March 7th, will be able to stem the protests. Although political protests have eased, economic and social unrest is widespread. The interim government has drawn up a "road map to democracy", but recent events cast a shadow over the interim government's commitment to the process. These include the dismissal of the interior minister, Farhat Rajhi, who had been widely praised for disbanding Mr Ben Ali's notorious security apparatus, and the suspension of work by the commission set up to investigate corruption. No reasons have been given for either decision. Steps have been taken to release the state and the economy from the grip of the former ruling party, the Rassemblement constitutionnel démocratique (RCD). The dissolution of the RCD prevents it from putting forward candidates in future elections, but does not bar its members from standing as independents or as representatives of another political party. Indeed, many of these former members have formed their own parties. Many members of Mr Ben Ali's extended family are under arrest and their assets have been sequestered. Former RCD members no longer form part of the government and are being removed steadily from the highest echelons of the civil service, state organisations and state-owned industries. However, most of the RCD members who occupy middle and lower levels of management remain in their posts, although they often face insubordination and recrimination from their non-RCD colleagues.

Much progress has also been made in opening up the democratic process, with 53 legal parties, including Hizb al-Nahda, an Islamist party, now registered to take part in the elections. However, three other Islamist parties have been banned. How to accommodate the popular appeal of Islamism is a problem that has beset regimes across North Africa for some time. In Tunisia, Islamists were conspicuous by their absence during the uprising, a factor that may have played a part in its success, as it deprived Mr Ben Ali of the opportunity to demonise the opposition by accusing it of being a front for al-Qaida-supporting extremists.

The army will continue to play a pivotal role in the Tunisian crisis. So far at least, it seems content to hold the ring for the politicians and to act, in the words of the head of the army, General Rachid Ben Ammar, as "the guarantor of the country, the people and the revolution". The army is likely to maintain this stance unless the security situation deteriorates markedly or the efforts to build a new political consensus collapse.

Elections for parliament and the presidency have been pushed back. The interim government has announced an election will be held on July 24th for a national constituent assembly, which will rewrite the constitution and prepare for parliamentary and presidential elections at a later, and as yet unspecified, date. Currently, 53 political parties are in discussions over how to proceed with organising elections. Candidates for the presidency are likely to include leaders of the main opposition parties, exiled leaders from parties that were banned by Mr Ben Ali and independents, including former members of the RCD. In previous elections, opposition parties were not free to campaign to a degree that would threaten the RCD. (In fact, in large cities such as the capital, Tunis, Sfax and Sousse, opposition parties were banned from campaigning.) The current parliament has not been dissolved but is, in reality, powerless since the speaker of parliament, Foued Mebazaa, has the power to rule by decree. The government will need to change the constitution, which contains tailor-made amendments by Mr Ben Ali that made it virtually impossible for a non-RCD member to stand for president. Candidates had either to obtain the endorsement of 30 members of parliament (most members of which were from the RCD) or to have served for two years as leader of a legally recognised party by election day.

The political landscape is increasingly fractured

More political parties have been legalised, bringing the current total to 53. Few of these parties appear to have clear policies and even fewer have any visibility among the general public. This seems like a recipe for political chaos. In this environment, parties with the best chances of winning votes would seem to be long-established parties from the old "dissident" opposition, such as the Parti démocratique progressiste; those with better-known leaders such as Ahmed Brahim, the leader of the former communist party, Harakat Ettajdid, who stood for the presidency in 2009; or those with an existing, if unquantifiable, base of support, such as the moderate Islamist Hizb al-Nahda. If, as is expected, members of the former ruling party, the Rassemblement constitutionnel démocratique (RCD), come together to form new parties, these could do relatively well in future elections if significant numbers of the old RCD membership (estimated at 2m people) vote for them.

Meanwhile, the government has denied legal status to five parties, including three Islamist parties, As-Salam, the Tunisian Sunni Party and Hizb at-Tahrir; the latter party wants to establish an Islamic state based on sharia (Islamic law) in which other parties would be banned, and does not rule out rebellion or civil disobedience to win power. The three parties were banned on the grounds that they contravene a 1988 law that bans parties based on religious, ethnic, regional or gender grounds, although the use of this particular law, introduced by the ousted president, Zine el-Abidine Ben Ali, seems to be a matter of political convenience given that the government has already authorised an Islamist party, Hizb al-Nahda, although this may be because the party has said that sharia has no place in Tunisia and has committed itself to the democratic process.

Tunisia's main Western allies, the EU, especially France, and the US, were slow to support the uprising against Mr Ben Ali. As a result, relations between Tunisia and France and the US have been strained since he was ousted. However, the West has welcomed the transition to democracy and has pledged to assist with funds and expertise. Relations with Italy have also been strained owing to the influx of migrants from Tunisia since the start of the protests in December 2010. The Economist Intelligence Unit expects a substantial amount of international aid to flow into Tunisia. In addition, the EU has said that it will finalise negotiations on Tunisia's "advanced status" application by July. The US and the EU regarded Mr Ben Ali as an important ally in the "war on terror" and will work closely with the new government to restore stability in the country, partly out of fear that prolonged instability would provide an opportunity for al-Qaida to establish an operating base there.

The interim government will seek to ensure that there is as little disruption to business as possible going forward and will also concentrate on boosting economic growth. It announced an emergency plan designed to boost growth by creating jobs; support firms damaged by the unrest; provide financial incentives for investment; and support exports. The challenge will be to ensure that economic growth is high enough to meet the demands of protesters for more jobs and higher standards of living, which will only be achieved through the market-oriented policies initiated by the old regime. However, the government will have to work hard to restore confidence in these policies by ensuring that growth is more evenly distributed. In light of the disruption to the economy, the budget will need to be revised. Nevertheless, the government will press ahead with its emergency plan, increasing the emphasis on reducing unemployment, particularly among graduates. In the interim period, it will increase benefits and subsidies on basic food items to lessen the financial burden on the unemployed. Tourism and foreign direct investment (FDI) will remain the main areas of focus for economic policy.

Mr Ben Ali's family, especially members of the Trabelsi family of his second wife, Leila, and his son-in-law, Mohammed Sakher al-Materi, had become increasingly rapacious, taking commanding stakes in virtually every business sector. The new government will face some tricky political and legal choices as it grapples with this commercial and financial legacy. In some cases this could entail nationalising stakes held by members of the Ben Ali and Trabelsi clans, and offering them to the public or to strategic investors at a later date; in others it may involve revoking contracts or licences and retendering the relevant projects. With the rise in importance of trade unions, foreign businesses are concerned whether the new government will be able to maintain the business-friendly policies adopted by the former regime and will honour deals negotiated under the old regime, especially ones that involved companies owned by members of Mr Ben Ali's family and close associates.

The interim government has announced an emergency plan aimed at reviving the economy, but the creation of jobs and incentives to increase investment will require the government to increase spending (in addition to social and welfare expenditure). This is likely to put more pressure on the internal and external financial balances and foreign reserves, which could be depleted rapidly in the coming months if economic activity does not quickly return to normal levels. Fiscal policy will remain expansionary for the remainder of the forecast period, as the government increases development expenditure in the interior regions. Fiscal consolidation will be difficult to implement in 2011 as sources of revenue will be reduced owing to the disruption in business activities. Corporation tax will be the main source of income as revenue from privatisations will dry up-foreign investors will be reluctant to invest in companies until the ownership structure becomes clearer. Tunisia may tap the international bond market, but borrowing will come at a much higher cost as risk premiums for the region have increased. In addition, rising commodity prices this year will only make it harder for the government to implement spending cuts. However, from 2012 onwards the government will attempt to expand the tax base-by reducing exemptions and improving tax collection. We estimate that the budget deficit reached 5% of GDP in 2010 and forecast that it will increase substantially, to 9.5% of GDP, in 2011. The deficit is expected to average 5.8% in 2011-15. We forecast that government revenue will decline in 2011, but from 2012 onwards it will rise strongly, in line with stronger domestic demand and measures to widen and deepen tax collection. The increase in revenue will be accounted for mainly by higher receipts from corporation tax and value-added tax (VAT).

We expect Banque centrale de Tunisie (BCT, the central bank) to implement measures to ensure sufficient liquidity in the banking system, but it will also keep a close eye on inflation. The central bank has further reduced reserve requirements from 5% to 4.5%. From 2012 onwards, it will maintain a relatively tight monetary policy, with the aim of ensuring that expansion in broad money (M2) stays manageable and inflation remains largely under control, although-given the easing of monetary policy in most major economies-there is scope for a looser policy. In the short term, the central bank will focus on maintaining liquidity to support bank lending, in light of the continuing unrest in the domestic market as well as the unrest in Libya (which will affect remittances). The BCT decided to leave its key interest rate unchanged.

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We have revised down our growth forecast for 2011 to 0.8% in line with projections made by the Tunisian government-official forecasts for growth in 2011 range from 0% to 1%. Our revision is based on an expected 50% decline in tourism revenue this year as well as a substantial fall in foreign investment. In spite of strong foreign trade figures for the first two months of 2011, we forecast that exports will fall by more than 10% this year. The exports in January and February are misleading as they reflect goods already manufactured and in the export pipeline, which explains the discrepancy between the data for industrial output-which has fallen across all major sectors-and exports. We estimate that real GDP grew by 3.4% in 2010, reflecting stronger EU demand for Tunisian products. However, import growth outpaced export growth as Tunisia imported large amounts of cereal to supplement weak agricultural output, owing to a shortage of rainfall. We forecast that growth will rebound strongly from 2012 onwards, averaging 3.7% in 2012-15, on the assumption that political and social stability is restored.

The new government will maintain high spending growth to stimulate the economy but will be constrained by limited revenue. It will seek to boost investment. Capital spending will increase, especially in the interior, the south and the west of the country, over the forecast period, as the government strives to even out development across the country. Provided that stability is restored, domestic private investment will expand more rapidly, now that Mr Ben Ali is no longer in command. FDI will also remain an important driver of growth.

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We estimate that annual average inflation rose in 2010 owing to higher oil and non-oil commodity prices and a fall in agricultural output, which increased the cost of wheat imports. We have revised up our forecast for oil prices in 2011, to an average of US$101/barrel (although prices may rise even further on fears of contagion of unrest to oil-exporting countries). We have raised our forecast for inflation in 2011, to an average of 5.3%, to reflect these higher oil and commodity prices. A relatively tight monetary policy will ensure that inflation remains manageable during the forecast period, at an average of 4.2%. Average inflation fell to 3.2% year on year in February. The explanation for this surprisingly low figure is that upward pressure on prices from supply-chain bottlenecks (arising from work stoppages) and from higher global commodity prices has been offset by reduced domestic demand.

The Tunisian dinar has remained resilient in spite of the protests, but if the unrest is sustained, it may put downward pressure on the currency. Nevertheless, it is also important to note that we expect a weaker US dollar in 2011 as concerns over the fiscal deficit in the US mount. Full liberalisation of the dinar will occur only after the forecast period. Initially, the dinar will remain pegged to a basket of currencies, of which the euro accounts for around two-thirds. The EU has said that it aims to finalise negotiations on Tunisia's advanced status application by July, which will grant it preferential trade terms. Full currency convertibility will require major reforms to the banking sector. In the interim period, the BCT will take a more flexible approach to exchange-rate management, reducing its interventions in the foreign-exchange market. We expect the dinar to strengthen against the euro for most of the forecast period, from TD1.95:EUR1 at end-2010 to TD1.71:EUR1 at end-2014. The currency will depreciate slightly in 2015, ending the year at TD1.77:EUR1. We expect the dinar to strengthen against the dollar, from TD1.44:US$1 at end-2010 to TD1.37:US$1 at end-2015.

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.

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The anti-government protests that led to the ousting of the former president, Zine el-Abidine Ben Ali, and the fall of the first two interim governments had largely ended by end-March, although the security presence in central Tunis, the capital, remained heavy. Attempts by protesters to stage a new sit-in outside government offices in central Tunis at the start of April were blocked by police, demonstrating a determination on the part of the interim prime minister, Béji Caid Essebsi, to end what he called the "recreation" of street protests that had stopped the country getting back to work. However, political unrest has been replaced by social and economic turmoil, as the revolutionary fervour has been directed at employers, managers and rivals for jobs. Workers in both the public and the private sectors have used their new-found sense of freedom to stage wildcat strikes and sit-ins to back demands for higher wages, better conditions and the dismissal of unpopular managers, especially if those managers belonged to the former ruling party, the Rassemblement constitutionnel démocratique (RCD). The economic disruption caused by social unrest is serious and makes it even more unlikely that expectations of more jobs and higher wages will be met. Moreover, a sense of insecurity has continued to plague the country as many police officers have still not returned to work.

The "democratic transition" moves forward haltingly

In a speech on March 30th, Béji Caid Essebsi said that Tunisia was "on the right track" and that he would not let the "historic revolution" fail. His actions since he took over as interim prime minister in February have generally been well received. However, it was not clear why, at the end of March, he sacked his interior minister, Farhat Rajhi, who had been widely praised for disbanding the notorious security apparatus of the ousted president, Zine el-Abidine Ben Ali. Mr Rajhi was replaced by Habib Essid, who was once a junior interior minister under Mr Ben Ali. Some critics said that Mr Rajhi had been too zealous in reforming the Ministry of the Interior for the liking of Mr Essebsi and the interim president, Foued Mebazaa, both of whom support the removal of senior officials from the former ruling party, the Rassemblement constitutionnel démocratique (RCD), but want to avoid a witch hunt throughout the administration.

Another development that has raised questions has been the suspension of the work of the official commission set up in February to investigate corruption and embezzlement on the grounds that its work was "unconstitutional". By the time it was suspended, the commission had received 4,239 requests to probe corruption and had studied 519 of them, notably ones linked to the former president, his wife and family, and senior officials close to them. The commission has been ordered to hand over all its documents to the state prosecutor. It is not clear why, although some critics believe that its investigations were getting too close to existing members of the interim government. If so, this does not bode well for the future of the democratic movement.

Against this background of uncertainty, work has continued, albeit unsteadily, to implement the "road map to democracy". The commission (the Commission for the Achievement of the Objectives of the Revolution and the Democratic Transition) charged with preparing an electoral code for the July 24th election for a national constituent assembly, which will, in turn, approve a new constitution and prepare for further elections for parliament and the presidency, has made little progress. Its first meeting in mid-Marchended in disarray after complaints that its 71 members, who had been nominated by the interim government from political parties, civil society groups and experts in constitutional law, were not representative of those who had led the revolution and, moreover, included 40 people who had signed a petition some months ago urging Mr Ben Ali to stand for re-election in 2014. On March 26th the commission's head, Iyadh Ben Achour, said that the membership would be enlarged to 130 to include "Islamists, leftists, nationalists and Arabists" and that anyone who had signed the petition calling for Mr Ben Ali to be re-elected would be excluded. Mr Ben Achour had to suspend a subsequent raucous meeting on March 30th, when most of the commission's members wanted to denounce the appointment of Mr Essid as interior minister. Mr Ben Achour threatened to resign, accusing members of trying to sabotage the commission's work. Given the potential for continuing disputes among the commission's members, there must be a strong likelihood that the planned election date of July 24th will have to be rescheduled.

At end-March a court rejected an appeal by the RCD against a March 9th ruling that it should be dissolved and its assets seized for violating the constitution by setting up a one-party regime and inciting the violence that followed Mr Ben Ali's flight. The dissolution prevents the party from putting forward candidates in future elections, but does not bar RCD members from standing as independents or as representatives of another political party. Three more senior associates of Mr Ben Ali have been detained pending trial. They are Abdelaziz Ben Dhia, a former defence minister and Mr Ben Ali's senior political adviser, Abdelwahab Abdullah, a former presidential spokesman and foreign minister, and Abdullah Kallel, who over the years has held the interior, defence and justice portfolios. Mohammed Trabelsi, a brother of Mr Ben Ali's wife, has been jailed for customs offences. Portraits of Mr Ben Ali have vanished, and long-banned books on corruption and human rights abuses under the former president have appeared in bookshops, replacing ones describing him as Tunisia's saviour. The central square and street in Tunis have been renamed, respectively, Place January 14th 2011, after the date on which Mr Ben Ali fled Tunisia, and Avenue Mohammed Bouazizi, after the young man who triggered the revolt by setting himself alight in Sidi Bouzid. The cafés of Tunis are alive with political debate, something unthinkable in Mr Ben Ali's police state.

Relations with Italy have been strained by a flood of migrants from Tunisia to Italy since the start of the political unrest. Over 23,000 migrants, most of them Tunisian but many from Libya and Sub-Saharan Africa, are estimated to have entered Italy from Tunisia between mid-December 2010 and end-March 2011, as a result of the breakdown in the Tunisian police and security services that had previously patrolled the coast. Some 18,000 migrants arrived at Lampedusa, a small Italian island with a population of only 5,000, in the first three months of 2011, compared with just 27 in the same period of 2010. Hundreds of migrants are feared to have drowned as unseaworthy boats capsized. The Italian government has criticised the Tunisian authorities for not doing enough to stem the flow of migrants. The Italian prime minister, Silvio Berlusconi, facing political pressure from anti-immigrant political parties in Italy, travelled to Tunis in early April for talks with the Tunisian authorities. Mr Berlusconi said that Italy would help to finance and equip Tunisian anti-immigration activities; the Tunisian government had agreed that an Italian technical team would stay in Tunisia to work with local officials and that the Italian navy would help to patrol the Tunisian coast. Mr Berlusconi could not, however, get Tunisia to agree to the mass repatriation of the 23,000 migrants who will now be given six-month visas, which will probably allow most of them to travel to other EU countries, such as France and Spain, where many have relatives. However, the Tunisian government agreed that new migrants would be repatriated. Italy provided Tunisia with EUR80m (US$59m) of aid and equipment and a EUR150m credit line at the end of March, and promised a further EUR350m at the start of April.

The interim government has unveiled a 17-point emergency action plan to revitalise the economy. At end-March Mr Essebsi said that the economy was growing at a rate of between 0% and 1%; in February the government had been forecasting growth of 2-3% this year, while the 2011 budget was predicated on growth of 5.4%. Unemployment is rising, the financial sector is weakening because of rising defaults, and the external payments deficit is growing as foreign investment declines and tourist receipts dip.

The action plan includes measures to create jobs, support firms damaged by the unrest, provide financial incentives for investment, especially in the underdeveloped interior, stimulate the financial markets, boost capital investment and support exports. Among specific measures taken, customs duties on imports of capital equipment have been halved to 6%; exporting firms have been allowed to sell half of their goods and services on the local market in 2011; firms damaged by the unrest will have their social-security payments reduced, tax payments rescheduled and debt interest subsidised. At the end of March Banque centrale de Tunisie (the central bank) moved for the second time this year to boost liquidity in the economy by reducing the banks' reserve requirement, by 0.5% to 4.5%. The bank had already reduced the reserve requirement from 7.5% to 5% at the end of February, releasing some TD360m (US$252m) for them to lend to local businesses.

According to the employment and training minister, Said Ayedi, under the action plan 20,000 public-sector jobs will be created in July, 20,000 young people will be recruited into the armed forces and 20,000 jobs will be created in the private sector, although this may be over-optimistic given the weakness of the economy. Mr Ayedi said that Tunisia was negotiating with its European allies to provide 4,000 jobs abroad. Additional training programmes would be provided for 10,000 graduates, and some 50,000 unemployed graduates would each be given TD200 (US$140) a month to help them find jobs. The ministry had received 127,000 applications for this scheme by the end of March. Mr Ayedi said that without urgent action unemployment could rise from some 520,000 now to 715,000 by July. Political unrest had caused the loss of 4,000 jobs, he said, and another 80,000 jobs could be lost in the next four months if the wave of strikes, sit-ins and unrealistic pay demands did not end. He said that thousands of Tunisian workers had returned from Libya (some estimates put the figure as high as 70,000), adding to the jobless total, and another 80,000 graduates would enter the job market this summer.

The government's fiscal position is deteriorating. Increased spending is being driven by the cost of the emergency measures being taken to revive the economy, together with demands from public-sector workers for higher wages and demands for compensation from those who have lost work. The cost of measures to create jobs and boost regional development alone is estimated at TD3bn (US$2.1bn). Subsidies for fuel and food will exceed the budgeted TD1.5bn because of rising world prices for oil and cereals. Tunisia has also had to carry most of the cost of helping the estimated 180,000 people who crossed from Libya into Tunisia in the two months to March 24th, following the unrest in Libya. If the economy recovers quickly the budgetary squeeze would be short and manageable. However, if the economic downturn is deep and prolonged, the public finances will weaken, along with the balance of payments and foreign reserves, requiring Tunisia to seek external financing in the coming months. According to government officials, EUR1bn (US$735m) in aid is expected from development agencies by the end of June. In late March the planning minister, Abdelhamid Triki, said that Tunisia could return to the international financial markets in the second half of 2011, or in 2012, although the downgrading of Tunisia's sovereign credit ratings will make this an expensive option.

The physical damage to business premises and stocks caused by the social unrest in the two months from January 14th will cost business some TD400m (US$280m), according to Hamadi Ben Sedrine, the head of the employers' association, UTICA. However, ongoing worker absenteeism is proving much more costly. A wave of wildcat strikes and sit-ins by workers in support of demands for higher wages, better conditions and the dismissal of unpopular managers have disrupted economic activity, making it even more unlikely that the jobs and higher standards of living that many people are hoping for will be provided in the short term. Some plants closed during the peak of the unrest and have not reopened; production at plants that have reopened has been disrupted by worker protests. Disruptive worker behaviour virtually shut down the Menzel Bourguiba industrial zone for long periods in March. A sit-in by workers shut down production at JAL, an Italian-owned bootmaker, which has 4,500 employees in four plants in the north-east. The textile workers' union is demanding a 10% increase in wages (employees wanted 15%), but the textile employers' association says the sector cannot afford it. Workers at the Med-Oil company, part of the locally owned Poulina Group, carried out five strikes that have forced the company to agree to a range of demands, including revised working hours, salary increases and reclassified job roles. However, the company has refused the demand to replace the managing director.

In the post-revolutionary chaos, the main trade union federation, UGTT, appears to have lost control of individual unions and is now facing a challenge from another union, the CGTT, which was launched in February. Employers have found it no easier to present a unified front. UTICA, which was once closely associated with the former regime, is seeking to reinvent itself under a new president, but is split by internal quarrels.

Industrial production in the first two months of 2011 was almost 13% lower than in the same period of 2010, owing to declines in the mechanical and electrical sector (8%), textiles (17%) and mining (23%)-the latter two sectors being low-skilled and vulnerable to absenteeism caused by social unrest. Tourist numbers to the end of March were down by 43%, as a result of cancellations by European tourists. The unrest in Libya will also lead to a sharp downturn in Libyan tourists (about 1.5m a year). The trade and tourism minister, Mehdi Houas, said that 2011 would be "catastrophic" for tourism and that receipts might fall by as much as 50%. This would be a serious blow to the economy because tourism generates some 6% of GDP, employs some 400,000 people and is the biggest single earner of foreign currency. Despite the domestic downturn, foreign trade has continued to be buoyant. Exports in the first two months of the year grew by 9.3% in value, to TD3.7bn (US$2.6bn), compared with the same period of 2010. Exports of mechanical and electrical goods rose by 18%, although exports of textiles fell by 1.7%. Since these figures do not align with the downturn in production, it is likely that in both sectors a significant proportion of the exports came from stock, rather than new production, but the picture will become clearer as data are released for the next two months. Imports in the first two months rose by 2.6% in value, to TD4.6bn. The stockmarket, the Bourse de Tunis, has recovered some of the losses registered in January and February, when it lost over 20% of its value. The TunIndex reached 4,360.7 on April 6th, which was just 14.7% lower than at the start of the year.

According to the Foreign Investment Promotion Agency (FIPA), only 33 of the 3,150 foreign companies in Tunisia have pulled out, with the loss of 2,400 jobs. However, new foreign direct investment has faded, falling by 22% in the first two months of 2011 compared with the same period of 2010. The head of FIPA, Noureddine Zekri, said that the new business environment in Tunisia based on transparency, good governance and anti-corruption will eventually cause confidence to return and lead to greater investment than ever before. For the moment, foreign investors are expected to bide their time, waiting for civil and social unrest to end and for the policies of the next government to become clear. They will want to be assured that the generally investment-friendly policies of the old regime will continue, and that investment and concession deals negotiated under the previous government, especially ones that involved members of Mr Ben Ali's family and close associates, will be honoured. That still cannot be guaranteed, especially if the fragmented political landscape leads to weak governments that have to satisfy the demands of a range of competing constituencies. In that case the steady process of economic liberalisation may slow down or come to a halt.

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Please see graphic below

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Land area

162,155 sq km

Population

10.4m (July 2009, Institut national de la statistique); 10.33m (mid-2007 IMF estimate)

Main towns

Population in '000s, excluding suburbs (2004 census)

Tunis (capital): 728

Sfax: 271

Sousse: 173

Kairouan: 118

Gabès: 116

Bizerte: 114

Climate

Mediterranean on the northern and north-eastern coasts, semi-arid inland and in the south

Weather in Tunis

Hottest month, August, 21-33°C (average daily minimum and maximum); coldest month, January, 6-14°C; driest month, July, 3 mm average rainfall; wettest month, January, 563 mm average rainfall

Languages

Arabic and French

Measures

Metric system. The quintal (100 kg) is used to measure crop weights

Currency

The Tunisian dinar (TD) is made up of 1,000 millimes

Time

1 hour ahead of GMT

Public holidays

New Year's Day (January 1st 2011); Mouled, or Prophet's Birthday (February 15th); Independence Day (March 20th); Youth Day (March 21st); Martyrs' Day (April 9th); Labour Day (May 1st); Republic Day (July 25th); Women's Day (August 13th); Eid al-Fitr, or end of Ramadan (August 30th); New Era Day (November 7th); Eid al-Adha, or Feast of the Sacrifice (November 6th); Hijara, or Islamic New Year (November 26th)

Note. The information on this page has been modified and is subject to further change as the new transitional government is put in place

Official name

Republic of Tunisia

Legal system

Based on the constitution of 1959

Legislature

The 214 members of the Chamber of Deputies are elected by universal suffrage for a five-year term; 53 of them are elected by proportional representation from those parties that fail to win seats under the first-past-the-post system; only officially recognised parties can contest elections; a 2002 constitutional amendment led to the establishment of an upper house in August 2005, the 126-member Chamber of Counsellors

National elections

Next election due in 2011 (presidential and parliamentary); amendments made to the constitution by the former president, Zine el-Abidine Ben Ali, will need to be removed to allow for fair representation of non-Rassemblement constitutionnel démocratique (RCD) members

Head of state

Mr Ben Ali stepped down on January 14th 2011, amid widespread protests. A presidential election is due to be held in 2011. Information on the length of the term and the maximum number of terms in office has yet to be released

Executive

Council of Ministers, presided over by the head of state, who is also head of the executive; if the Council does not receive the support of the Chamber of Deputies, the latter may be dissolved by the president, after which elections for a new assembly would be held. The most recent cabinet reshuffle took place in January 2010

Main political parties

Mouvement des démocrates socialistes (MDS); Parti de l'unité populaire (PUP); Parti démocratique progressiste (PDP), formerly the Rassemblement socialiste progressiste (RSP); Harakat Ettajdid (HE); Parti social libéral; Union démocratique unioniste (UDU); Forum démocratique pour le travail et les libertés (FDTL); Hizb al-Nahda

The government

Prime minister: Béji Caid Essebsi

Key ministers

Administrative development: Vacant

Agriculture & environment: Mokhtar Jelil

Culture: Ezzedine Bach Chaouech

Education: Tayeb Baccouch

Finance: Jelloul Ayed

Foreign affairs: Vacant

Health: Habiba Zehi

Higher education & scientific research: Rifaat Chaabouni

Industry & technology: Abdellaziz Rassaa

Interior: Habib Essid

Justice: Lazhar Karoui Chebbi

National defence: Abdelkarim Zebidi

Planning & international cooperation: Abdelhamid Triki

Religious affairs: Laroussi Mizouri

Regional & local development: Abderrazak Zouari

Social affairs: Mohammed Naceur

Trade & tourism: Mehdi Houas

Transport & public works: Yassin Ibrahim

Women: Lilia Abidi

Central bank governor

Mustapha Kamel Nabli