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Tunisia sees 14% budget gap in 2020, aims to halve it in 2021

TUNIS (Reuters) - Tunisia expects the coronavirus crisis to drive its budget deficit to 14% of gross domestic product in 2020, double the original target and the highest in nearly four decades, a government official told Reuters on Friday.

FILE PHOTO: The deserted empty Marsa beach is pictured, as the country extended the lockdown by two weeks to contain the spread of the coronavirus disease (COVID-19) in Tunis, Tunisia April 1, 2020. REUTERS/Zoubeir Souissi/File Photo

The North African country aims to reduce the shortfall to 7.3% in 2021, the official said. The official declined to be named because he was not authorised to speak to the media.

Tunisia hopes that its economy will begin to recover from the effects of the crisis after a historic recession this year.

“Tunisia expects GDP growth of 4% next year compared to a record contraction of 7% expected this year according the draft budget for 2021,” the official said.

Tunisia’s tourism-dependent economy shrank 21.6% in the second quarter of 2020 from a year earlier, hit hard by travel bans imposed to stem the spread of the coronavirus.

Tunisia had expected to borrow 12 billion Tunisian dinars ($4.36 billion) in 2020, but its needs have increased significantly due to the crisis. The borrowing needed this year is not known yet, but other officials say it is likely to exceed 21 billion dinars.

Next year, the nation’s borrowing needs are estimated at about 19.5 billion dinar, including $6 billion in foreign loans, the government official said.

Tunisia plans to cut corporate taxes to 18% next year from 20% and 25% now to help companies through the crisis and boost investment, he added.

Tunisia is the only Arab state that managed a peaceful transition to democracy after the “Arab Spring” uprisings that swept through the region in 2011.

But its economy has been crippled by high debt and deteriorating public services, made worse by the global coronavirus outbreak, and a year of political uncertainty has complicated efforts to address those problems.

($1 = 2.7504 Tunisian dinars)

Reporting by Tarek Amara; Editing by Alison Williams and Tomasz Janowski; Editing by Toby Chopra

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