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Cablegate: Tunisia Economic Highlights

VZCZCXRO3406
PP RUEHTRO
DE RUEHTU #0340/01 0951051
ZNR UUUUU ZZH
P 041051Z APR 08
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 4737
INFO RUEHAS/AMEMBASSY ALGIERS PRIORITY 7662
RUEHEG/AMEMBASSY CAIRO PRIORITY 1599
RUEHLO/AMEMBASSY LONDON PRIORITY 1454
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0988
RUEHFR/AMEMBASSY PARIS PRIORITY 1921
RUEHRB/AMEMBASSY RABAT PRIORITY 8540
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0227
RUEHCL/AMCONSUL CASABLANCA PRIORITY 4218
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 TUNIS 000340

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/MAG (HARRIS)
STATE PASS USTR (BURKHEAD)
USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR (REITZE), AND
CLDP (TEJTEL)
CASABLANCA FOR FCS (ORTIZ)
LONDON AND PARIS FOR NEA WATCHER

E.O. 12958: N/A
TAGS: ECON ETRD SENV EFIN BEXP ENRG TS
SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS

REF: TUNIS 113

07 TUNIS 1528
07 TUNIS 758
06 TUNIS 2749

1. (U) This cable contains highlights of recent economic
developments in Tunisia on the following topics:

A. Tunisia Economy Posts 5.8 Percent Year-On-Year Growth
B. Hike in Gasoline Prices
C. Stock Market Records Largest IPO To Date
D. Central Bank Keeps Benchmark Interest Rate Steady
E. Italian Leasing Bank Opens Branch

--------------------------------------------- --------
Tunisia Economy Posts 5.8 Percent Year-On-Year Growth
--------------------------------------------- --------

2. (U) According to recently released Tunisian National Institute of
Statistics (INS) figures, Tunisia's economy expanded by 5.8 percent
year-on-year in the last quarter of 2007 as the transport and
telecommunications sectors strengthened their performances. GDP
growth for 2007 has been reported as reaching 6.3 percent, topping
an initial forecast of 6.0 percent. Tunisia's GDP stood at 6.074
billion dinars (US $5.267 billion) in the final three months of the
year, up from 5.739 billion dinars (US $4.976 billion) in the same
period of 2006. The transport and telecommunication services
industries grew 16 percent in the quarter, while manufacturing
expanded by 11 percent. Rising exports boosted the textile sector's
growth to 9.7 percent in the final three months of the year, while
food processing industries grew 4.4 percent.

3. (U) The GOT has announced a target of 6.1 percent growth for
2008. Prime Minister Mohamed Ghannouchi stated that he hopes a
strengthening private sector based on information technology and
services will accelerate the average annual growth rate to 6.3
percent in the next 10 years. This improvement over the previous
decade's 5.0 percent average would help cut unemployment. However,
the International Monetary Fund Article IV Report anticipates that
Tunisian growth will slow to 5.7 percent this year as a result of
soaring commodity prices and weaker European markets.

-----------------------
Hike in Gasoline Prices
-----------------------

4. (U) On March 2, the GOT announced an increase in domestic
gasoline prices by 4.16 percent to cut an energy budget deficit that
has widened due to soaring world prices. The price of unleaded gas
rose to 1.250 dinars (US $1.05) per liter from 1.200 dinars (US
$0.95). The last price increase was in October 2007, but gas prices
have been raised 10 times since 2004 (Ref B). The GOT has estimated
that each one dollar increase in the price of crude oil creates a US
$28 million increase in government expenditures.


----------------------------------------
Stock Market Records Largest IPO To Date
----------------------------------------

5. (U) On March 17, the Tunisian Stock Exchange (BVMT) launched its
largest capitalization operation to date with the US $219.16 million
initial public offering (IPO) of Tunisian car dealer Artes. Artes
is part of the Mzabi Group, one of Tunisia's largest business
groups, and is the distributor for Nissan and Renault. Artes issued
7,695,900 hares, 30.2 percent of the company, for a share prce of
10.330 dinars (US $9.12). The IPO, which as open to foreign
investors, was split between fixed-prce offering on the stock
exchange and aguaranteed placement organized by local brokerages
FINACorp and BNA Capitaux. The firm's capitaliztion represents 3.9
percent of the total market.

6. (SBU) Comment: The Stock Exchange expects for new firms to list
on the primary market this yer, a welcome improvement given the
small number 50) of listed companies on the primary market (Ref A).

TUNIS 00000340 002 OF 002


The GOT has encouraged Tunisian companies to list by providing a 10
percent tax break for five years to those companies that offer 30
percent or more of their capital. End Comment.

--------------------------------------------- ----
Central Bank Keeps Benchmark Interest Rate Steady
--------------------------------------------- ----

7. (U) On March 25, Tunisia's Central Bank (BCT) announced it will
keep its benchmark interest rate on hold at 5.25 percent while it
assesses the potential impact of global economic problems on export
growth. Consumer prices rose 5.7 percent year-on-year in February,
down from 5.8 percent in January but still under pressure from high
world commodity prices. The last time the BCT changed its benchmark
rate was in September 2006.

8. (SBU) Comment: While many Middle Eastern countries have used
monetary policy to blunt the impact of the declining dollar and
weakening US economic growth, limited economic ties with the United
States lessen the effect on Tunisia. Although inflation is up due
to high world commodity prices, the BCT rarely alters benchmark
interest, having only changed the rate once since 2003. In 2006,
the BCT raised the benchmark rate from 5.0 to 5.25 percent in an
effort halt rising inflation (Ref D). However, the large share of
fixed prices in the economy constitutes a major impediment to
inflation targeting. One-third of products in the Consumer Price
Index basket have fixed prices, hampering the BCT's ability to use
monetary policy to tackle inflation. The use of monetary policy for
targeting inflation remains a new concept for the BCT, which only
assumed responsibility for it in 2006 (Ref C).

---------------------------------
Italian Leasing Bank Opens Branch
---------------------------------

9. (U) On March 6, a major Italian leasing bank, Banca Agrileasing
opened its first branch in Tunisia. Agrileasing, a division of
Italy's Cooperative Credit, aims to support Italian small and
medium-sized enterprises. During a press conference held in Tunis,
Director of Tunisia Agrileasing Mariella Liverani said the opening
of was a first step on the road to a larger presence of the Italian
Cooperative Credit in the Mediterranean. Banca Agrileasing is the
fourth Italian and tenth foreign bank to open a branch in Tunisia.

10. (U) Italian presence in the Tunisian banking sector remains
limited. Three major Italian banks, Monte dei Paschi di Sienna,
Banca di Roma/Capitalia and Banca Intesa, have branch offices in
Tunisia, but there is no Italian commercial bank presence. There is
considerable minority equity holding from Italy in several of
Tunisia's private banks. Italy is one of Tunisia's major trading
partners, with over 4.7 billion dinars (US $3.713 billion) in
Italian exports to Tunisia in 2007.
GODEC

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