NEWS RELEASE

NEWS RELEASE
Dec 24, 2015
R&I Downgrades to BB+, Negative: Republic of Tunisia, The Central Bank of Tunisia
Rating and Investment Information, Inc. (R&I) has announced the following:
ISSUER:
Republic of Tunisia
Foreign Currency Issuer Rating: BB+, Previously BBBRating Outlook: Negative
The Central Bank of Tunisia
Foreign Currency Issuer Rating: BB+, Previously BBBRating Outlook: Negative
RATIONALE:
Tunisia's economy has been slowing down since the beginning of 2015. The current account balance
is still in substantial deficit. The Foreign Currency Issuer Rating for Tunisia had been BBB- based on
R&I's view that the country is able to establish economic fundamentals commensurate with the rating if it
gains political stability and its government can work on economy reconstruction in earnest. The country
has achieved steady progress in democratization and the new government has been exerting policy
efforts. However, its road to improve economic fundamentals is becoming increasingly difficult when the
international economic environment is unfavorable and the social and security situation is exacerbated. In
light of such circumstances, R&I has downgraded the Foreign Currency Issuer Rating to BB+.
The reason for the rating downgrade by just one notch is based on R&I's judgement that concerns
about the government's funding and the foreign currency liquidity of the country's economy will remain
limited, given that fiscal deficits are reined in at a certain level and foreign reserves are stable thanks to
financial assistance from national governments and international institutions including the International
Monetary Fund. Nevertheless, R&I needs to ascertain the economic and fiscal prospects, as Tunisia
continues to be in the challenging environment. The Rating Outlook is thus Negative.
Tunisia maintained growth in real gross domestic product (GDP) at around 2% in 2013 and 2014.
Since the beginning of 2015, however, the growth has been decelerating. The year-on-year growth rate
was only 0.8% in the January-September period of 2015. The full-year growth for 2015 is expected to be
around 0.5%. R&I considers the slowdown is mainly attributable to bad harvests, weak demand from
Europe, a major export destination, sluggish mining production caused by strikes, and several terrorist
attacks. Although the government forecasts modest growth of 2.5% for 2016, growth may fall below the
target, affected by, for example, the global economy and the social and security situation. Constant
attention is required.
The unemployment rate remains high at about 15%. This is believed to be attributed not only to the
economy but to structural issues, so the government is working to reform the labor market. The key to
achieving steady growth in the medium and long term lies in whether it can accelerate efforts to vitalize
the private sector, including improvement of an investment climate -- one of the reasons for weak
investment. R&I will pay attention to the government's policy management capability, specially focusing
on whether it is able to exert politically concerted efforts to tackle security and economic structural issues.
The current account remains in large deficit of more than 8% of GDP. The central bank projects the
deficit to be 8.7% in 2015, as the service account surplus, primarily from tourism revenue, is expected to
narrow, despite estimated improvement in the trade balance. As the economy of Europe, its major export
destination, picks up, the current account balance will likely recover gradually but remain in deficit of 6-8%
of GDP for a few years. The foreign reserve position is stable, and the latest amount is 12.6 billion dinars
(approximately US$6.4 billion), which covers nearly 4 months of imports. External debt is increasing
modestly. The central bank expects the ratio of external debt to GDP to be 61.2% at end-2015. Of the
external debt, short-term debt accounts for slightly over 20%, nearly half of which consists of non-resident
■Contact
: Investors Service Division
TEL.+81-(0)3-3276-3511
■Media Contact : Corporate Planning Division (Public Relations) TEL.+81-(0)3-3276-3438
Rating and Investment Information, Inc.
E-mail. [email protected]
Nihonbashi 1-chome Mitsui Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027,
http://www.r-i.co.jp
Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are not
statements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.
R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is not
liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details,
please refer to http://www.r-i.co.jp/eng/policy/policy.html.
© Rating and Investment Information, Inc.
NEWS RELEASE
deposits, and it is about 90% of foreign reserves.
In 2014, the then government led by Mehdi Jomaa narrowed the fiscal deficit to 4.9% of GDP in its
efforts to curb fiscal deficits with the top priority on stabilization of the macro economy. The deficit in 2015
is also expected to be kept in check at 4.3%. The current government led by Habib Essid, which took
office in February after the parliamentary election held for the first time under the new constitution, has
continued with the fiscal policy that gives consideration to reining in deficits, which R&I views positively.
The fiscal structure has, however, been worsening partly because the government has cut capital
expenditure while increasing wage expenditure as part of the economic stimulus measures. If the
government maintains this stance, fiscal conditions could become rigid and it would be difficult to ensure
sufficient fiscal resources required to strengthen the economy's growth potential.
The government recognizes this issue. In the 2016 budget, it increased capital expenditure by a
double-digit percentage, while containing wage expenditure to the same level as the previous year. It also
plans to narrow the fiscal deficit to 3.9% of GDP. To boost revenue, a drastic reform of the tax system is
scheduled to be implemented. Eyes will be on the effect of the reform. The central government's
outstanding debt stood 51.1% of GDP at end-3Q 2015. The increasing trend of debt will likely continue for
the foreseeable future.
The primary rating methodology applied to this rating is provided at "R&I's Analytical Approach to
Sovereigns". The methodology is available at the web site listed below, together with other rating
methodologies that are taken into consideration when assigning the rating.
http://www.r-i.co.jp/eng/cfp/about/methodology/index.html
R&I RATINGS:
ISSUER:
RATING:
Republic of Tunisia
Foreign Currency Issuer Rating
BB+, Previously BBB-
RATING OUTLOOK:
Negative
ISSUER:
The Central Bank of Tunisia
RATING:
Foreign Currency Issuer Rating
BB+, Previously BBB-
RATING OUTLOOK:
Negative
Japanese Yen Bonds No.6
Issue Date
Maturity Date
Issue Amount (mn)
Aug 15, 1997
Aug 15, 2017
JPY 12,500
RATING:
BB+, Previously BBB-
Global Japanese Yen Bonds
due 2030
Issue Date
Maturity Date
Issue Amount (mn)
Aug 02, 2000
Aug 02, 2030
JPY 15,000
RATING:
BB+, Previously BBB-
■Contact
: Investors Service Division
TEL.+81-(0)3-3276-3511
■Media Contact : Corporate Planning Division (Public Relations) TEL.+81-(0)3-3276-3438
Rating and Investment Information, Inc.
E-mail. [email protected]
Nihonbashi 1-chome Mitsui Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027,
http://www.r-i.co.jp
Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are not
statements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.
R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is not
liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details,
please refer to http://www.r-i.co.jp/eng/policy/policy.html.
© Rating and Investment Information, Inc.
NEWS RELEASE
Global Japanese Yen Bonds
due 2031
Issue Date
Maturity Date
Issue Amount (mn)
Mar 15, 2001
Mar 17, 2031
JPY 20,000
RATING:
BB+, Previously BBB-
Japanese Yen Bonds No.7
Issue Date
Maturity Date
Issue Amount (mn)
Aug 09, 2007
Aug 09, 2027
JPY 30,000
RATING:
BB+, Previously BBB-
■Contact
: Investors Service Division
TEL.+81-(0)3-3276-3511
■Media Contact : Corporate Planning Division (Public Relations) TEL.+81-(0)3-3276-3438
Rating and Investment Information, Inc.
E-mail. [email protected]
Nihonbashi 1-chome Mitsui Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027,
http://www.r-i.co.jp
Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are not
statements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.
R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is not
liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details,
please refer to http://www.r-i.co.jp/eng/policy/policy.html.
© Rating and Investment Information, Inc.