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