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




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Central Bank Statistics Show Climbing Inflation
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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.

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Tunisian Olive Oil Exports Fall Below GOT's Expectations
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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.

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TUNIS 00002303 002 OF 002


Tunisia and Libya Continue Dialogue on Trade, Tourism
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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.

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Tunisia to Increase Oil Exploration
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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.

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AIRBUS A380 Test Flight to the Tunisian Desert Delayed
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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