By PAUL SCHEMM, Associated Press
TUNIS, Tunisia (AP) — After a disastrous year in which revolution, social upheaval and strikes scared away tourists and crippled industrial production, Tunisia's economy is slowly climbing out of a deep recession that saw it shrink by 2 percent in 2011.
Tunisian economic recovery is vital to the success of the democratic transition of this North African country of 10 million people that touched off the Arab Spring in 2011. The country, however, needs political stability to allow the economy to recover, while at the same time it needs the economy to calm social tensions.
When fruitseller Mohammed Bouazizi set himself on fire in December 2010 and galvanized a nation, it wasn't just a dictatorship he was protesting but a dead-end life with no prospect of real jobs — something that is still a problem in Tunisia.
"This fragile political climate and subsequent political noise which are already embedded in our baseline scenarios underpin Moody's negative outlook for Tunisia," said the prominent ratings agency in a report in June that applauded the nascent signs of recovery while expressing concern over social tensions, including riots.
Although squabbles at the top of Tunisia's government worry international donors, the European crisis devastating the economies of Tunisia's largest trading partner also threaten economic recovery.
After last year's contraction, the $46 billion dollar economy, which cannot rely on the vast oil resources of its wealthy neighbors Libya and Algeria, is predicted to grow by a modest 3.5 percent in 2012.
"There is an economic recovery, it is not as strong as we would want, largely because of Europe and also because of the political uncertainty that continues," central bank Governor Mustapha Kamel Nabli told The Associated Press in an interview shortly before he was fired by the president.
On June 27, President Moncef Marzouki abruptly announced Nabli's dismissal, apparently without the necessary agreement of the powerful office of Prime Minister Hamadi Jebali.
In an interview with AP a few days later, Ridha Saidi, the deputy prime minister for economic affairs, said Nabli had not been dismissed and they were seeking a compromise. Saidi admitted the issue was part of a broader disagreement between Marzouki and Jebali over how their respective offices shared power.
Yet it was the same Saidi who two weeks later, was tasked with presenting the case for Nabli's dismissal in front of the assembly that finally voted him out Wednesday.
"It gives a bad signal to domestic economic players as well as foreign ones and that's not good for the recovery of the economy," warned Nabli afterwards in an interview with French network France 24, saying he was dismissed for political reasons. "There is a clear will to take control of all the institution of the state."
While Tunisia has yet to receive the billions in economic aid promised by various international conferences, it did get a $100 million grant from the U.S. in March as well as a $400 million bond that guarantees Tunisia can borrow at favorable rates on the international market.
There has also been talk in the U.S. Congress of starting negotiations next year on a U.S.-Tunisia free trade treaty to support the democratic transition.
In the short term, Tunisia needs to revive its tourism sector, which makes up 7 percent of GDP and directly employs 400,000 people.
In 2011, tourists stayed away in droves, leaving empty beaches and deserted bazaars in their wake. Now they appear to be returning, and in the first five months of 2012 much of the ground lost has been made up and receipts are at 87 percent their 2010 levels.
In the winding alleys of Tunisia's old city, Juma Ben Salem sells heavily brocaded gowns and said that finally business is looking up.
"It's getting better, it's steadily going up again. Not 100 percent, but it's not bad and it's certainly better than nothing and that's what we had last year," he said on a calm Sunday when the narrow streets were mostly empty of visitors. "All we need is some calm and stability."
Even on quiet days, the tour buses are back, disgorging crowds of Italian, Spanish and Russian tourists, though on the beaches near Tunis most of those enjoying the sun appeared to be locals.