Moody's outlook for Tunisia's banking sector, negative (report)

June 29, 2022

TAP)- Moody’s said in a new report that its outlook for Tunisia’s banking sector is negative 'amid ongoing political and economic turmoil that has engulfed the country since the president seized executive power last year.'

The banks are heavily exposed to the government, whose outlook is also negative.

'Inflationary pressures, exacerbated by the impact of the military conflict in Ukraine, and potential local currency depreciation if discussions over a third IMF bailout for the country are unsuccessful, will exacerbate banks' problem loans, increase liquidity shortages and risk eroding their profitability.’’ said Badis Shubailat, Analyst at Moody’s.

'In addition, Tunisia’s fragile economic recovery from a sharp coronavirus-induced recession in 2020, persistent fiscal and current account deficits and inability to access international capital markets will weigh on banks’ solvency and liquidity profiles over the next 12 to 18 months.' added Shubailat

The government’s capacity to support ailing banks is weakening. Further delays in securing a new IMF programme would erode foreign-exchange reserves through drawdowns for debt service payments, exacerbating balance of payment risks, Moody's pointed out.

Following a sharp contraction in real GDP of 8.7% in 2020 and a modest technical rebound to 3.1% in 2021, growth will likely stay subdued at 2.2% this year and no more than 2.5% next year.


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