TUNISIA ECONOMIC HIGHLIGHTS: AUGUST 15 - August 31

UNCLAS SECTION 01 OF 02 TUNIS 002303 SIPDIS SENSITIVE SIPDIS STATE FOR NEA/MAG (MHARRIS) AND EB/CIP STATE PASS USTR (BELL),USPTO (ADLIN),USAID (METZGER) USDOC FOR ITA/MAC/ONE (ROTH),ADVOCACY CTR (JAMES),AND CLDP (TEJTEL) CASABLANCA FOR FCS (RORTIZ) PARIS FOR NEA WATCHER E.O. 12958: N/A TAGS: ECON EFIN ETRD ELAB EAIR TS SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS: AUGUST 15 - August 31 REF: TUNIS 2173 ¶1. (U) This cable contains highlights of recent economic developments in Tunisia on the following topics: ¶A. Central Bank Figures Show Climbing Inflation ¶B. Tunisian Olive Oil Exports Fall Below GOT's Expectations ¶C. Tunisia and Libya Continue Dialogue on Trade, Tourism ¶D. Tunisia to Increase Oil Exploration ¶E. AIRBUS A380 Test Flight to the Tunisian Desert Delayed -------------- -- Central Bank Statistics Show Climbing Inflation -------------- -- ¶2. (U) Central Bank statistics released August 29th show that the average rate of inflation for the first seven months has reached 4.7 percent. Over the past year the average rate of inflation has risen from 1.4 percent in July 2005 to the current figure of 4.7 percent. ¶3. (U) In foreign trade, Central Bank figures show the current account widening by 580 million dinars (USD 443.6 million) on the year over the previous period in 2005. Exports rose 10.6 percent over the July 2005 figures but were offset by a 13.9 percent rise in imports. Exports of textile and clothing dropped 3.5 percent. The rise in imports is largely attributable to the importation of energy (34.6 percent) and raw materials and semi-finished products (12.4 percent). The current account deficit represents 2.1 percent of GDP over the first seven months of 2006, of which 1.4 percent is attributable to the cost of energy. Foreign currency reserves, however, are up approximately 50 percent over the same period in 2005. The increase is partially explained by the earnings from the 35 percent privatization of Tunisie Telecom. -------------- -------------- Tunisian Olive Oil Exports Fall Below GOT's Expectations -------------- -------------- ¶4. (U) During the first half of 2006, Tunisia reportedly exported only 75,000 metric tons of olive oil, far below the target needed to reach the GOTs initial forecast of 180,000 metric tons for the marketing year ending this November. Tunisia has an excess stock of nearly 80,000 metric tons of olive oil. Tunisia produces, on average, 170,000 metric tons of olive oil annually, with 35 to 50,000 metric tons for local consumption and the remaining quantity for export. Olive oil is one of Tunisias most important exports. Tunisian olive oil exports were negatively affected by better-than-expected olive crops in Italy and Spain, the two main export markets for Tunisian olive oil. Tunisian olive oil is primarily sold in bulk to Italian and Spanish producers who blend and rebottle Tunisian olive oil under their own labels. Additionally, Tunisian olive oil exporters have had difficulty recouping their production costs as the Spanish and Italian olive oil inventories pushed the market price of olive oil down. Based on the GOTs optimistic forecast for exports, many Tunisian olive oil producers paid high prices for this years olive crop. ¶5. (SBU) Comment: The lackluster export of Tunisian olive oil is an example not only of the failure of the GOTs forecasting abilities, but is also a product of the Tunisian industrys reliance on bulk sales. In order to r to become less dependent on the Spanish and Italian markets, the Tunisian industry needs to address the shortage of processing and bottling facilities. End Comment. -------------- -------------- TUNIS 00002303 002 OF 002 Tunisia and Libya Continue Dialogue on Trade, Tourism -------------- -------------- ¶6. (U) Tunisian and Libyan officials from the commerce and tourism sectors met to discuss and implement the creation of the free trade zone recommended by the 19th Libyan- Tunisian High Commission, held in Tunisia in July 2006. Libya is Tunisia's most important Arab and African trade partner. In 2005, the volume of trade between Libya and Tunisia reached 1.27 billion Tunisian dinars (USD 970 million). For the first seven months of 2006, the trade exchange has already reached 1.07 billion dinars (USD 817 million). ¶7. (SBU) Comment: While both Tunisia and Libya have agreed in principal to create a free trade zone that will allow the free movement of both goods and people, Tunisian traders continue to face administrative controls imposed by Libyan authorities. Tunisian companies must export their goods through state-controlled Libyan trade agencies. No such restrictions exist for Libyan exports to Tunisia, which can be imported by private companies or smuggled across the border, as evidenced by the numerous Tunisian road side stands boasting cut-rate Libyan gasoline. End Comment. -------------- Tunisia to Increase Oil Exploration -------------- ¶8. (U) Soaring oil prices and the continuing growth of local demand have pushed the GOT to intensify drilling activities. According to the Financial Director of the Entreprise Tunisienne dActivites Petrolieres (ETAP),it will raise 75 million USD on the international market to finance exploration operations on its concessions for fiscal year 2006. Additionally, the Ministry of Industry has increased the issuance of drilling licenses, issuing 14 in 2005 from an average of only four licenses per year. Investments for activities related to exploration reached 150 million USD in 2005, whereas the former annual average used to be 100 million USD. The current national production is 3.4 million tons of oil equivalent, roughly 70 thousand barrels per day. -------------- -------------- AIRBUS A380 Test Flight to the Tunisian Desert Delayed -------------- -------------- ¶9. (U) Local press and international wire services reported that on August 29, an Airbus A380 test flight to the Tunisian desert was postponed for unspecified technical reasons, according to Lotfi Jomni, Director of the Tozeur- Nefta Airport. The superjumbo jet was scheduled to fly to the airport of Tozeur-Nefta in southern Tunisia, but the pilot returned to the plane's base in Toulouse, France, 34 minutes after taking off. BALLARD