Summary:

In the first quarter of 2023, investment in the services sector dropped nearly 40% from the same period in 2022, according to the Tunisian Agency for the Promotion of Industry and Innovation (APII). In Q1 2022, investment in services reached 316.9 million dinars, however, this total fell by 125.3 million dinars to 191.6 million dinars.

Despite the drop in services investment value, the number of projects reportedly rose slightly from 2,514 to 2,546. The number of new jobs created also rose slightly from 7,998 in Q1 2022 to 8,234 in Q1 2023.

Projects with foreign participation in the investment fell by 4% from 329 projects with foreign investment participation in Q1 2022 to 316 in Q1 2023.

A 2021 World Bank report on the role of the services sector in developing economies found that “the services sector accounted for an average of 55 percent of GDP and 45 percent of employment in developing economies.” The report argues broadly that services have a critical role to play in economic development beyond the traditional view of industrialization as a necessary path to growth.

Outlook:  

An overall drop in services investment value alongside a rise in the number of projects and jobs created points to a larger number of small projects, as opposed to larger scale projects. Lower foreign participation is likely due to external perceptions of Tunisia’s political and economic stability becoming increasingly negative.

The simultaneous challenges of irregular migration, political transition, and economic uncertainty have driven a high-risk narrative, particularly outside of Tunisia. This narrative is likely contributing to fewer services investments in 2023. Our team is continuing to monitor economic developments and the investment climate for indications of notable shifts in the risk environment.

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