With GDP edging back up, Tunisia's industrial sector is looking to regain its momentum after social unrest earlier this year stalled expansion. Yet the slow domestic economy recovery and recession, local manufacturers may struggle to fill order books, at least in the short term, Oxford Business Group said. The Central Bank of Tunisia said in August that the country's economy is still in recession: GDP contracted by 3.3 percent in the first quarter of 2011, and posted zero growth in the second quarter. However, the African Development Bank (AfDB) predicted that Tunisia will edge into positive territory in the second half of the year, with GDP forecasted to increase by a modest 0.4 percent to 0.7 percent for the year, down from 3.7 percent in 2010, Arab Global Network reported. Industry has played an increasingly important role in the Tunisian economy in recent years, contributing around 34 percent of GDP, second only to the services sector, and employing some 32 percent of the national workforce. After tourism it has been the hardest hit sector of the economy in the recent slowdown. – SG The Agency to Promote Foreign Investment said that the first six months of 2011 saw a 17.2 percent fall in foreign direct investment (FDI), with total inflow reaching TD775.3 million ($563 million) compared to TD936.6 million ($681.3 million) for the first half of 2010. While the tourism sector was the most affected, with investments slumping by 93 percent, Tunisia's manufacturers also saw their own FDI diminish, with inbound investments down by 18 percent. The sharp decline in the tourism industry will also have a flow-on effect for the manufacturing sector, with demand for services across the board likely dropping. Until confidence and foreign visitors begin returning, the decreased need for construction materials and reductions in tourism revenue will mean less money circulating in the economy, resulting in lower demand for manufactured goods. However, while FDI may be down, overall investments in the industrial sector are rebounding, according to a report issued by the Ministry of Industry and Technology in mid-August. For the first seven months of 2011, industrial investments totaled TD1.96 billion ($1.43 billion), a 22.2 percent increase on the same period in 2010. The mechanical and electrical segment lead the way with a 49 percent rise, followed by agri-food industries, which recorded a 37.2 percent jump in capital spending. With FDI down, this strong industrial investment suggests that local businesses are regaining some faith in the economy.
