Thoughts from a Renaissance man Economics & Strategy 25 January 2018 Charles Robertson +44 (207) 005-7835
[email protected] Mobile +44 7747 118 756 @RenCapMan Vikram Lopez +44 (207) 005-7974
[email protected] Thoughts from a Renaissance man Tunisia: Outperforming in the 2020s We think Tunisia should be a winner in the 2020s, thanks to good literacy and infrastructure, as well as recent FX-driven competitiveness gains. The TND is the cheapest currency in Africa or Frontier markets, according to our REER model The Tunisian dinar (TND) this year became the cheapest currency of all the Frontier or African economies in our real effective exchange rate (REER) model. Unlike for some volatile currencies, this is an exceptional occurrence. The TND has only been more than 20% cheap vs fair value of TND1.9/$ in just 3% of the months since 1995. Its current level is contributing to a big shift in competitiveness. Already at the average exchange rate for 2017, the minimum wage in euro terms has fallen by 13% since 2012, a deeper fall than Greek hourly labour costs over 2012-2016. The minimum wage is now roughly half the level of that in Morocco – which itself has a fairly valued currency based on our REER model. Tunisia has become increasingly competitive within North Africa and vis-à-vis Emerging Europe This big improvement in competitiveness is against a positive backdrop for literacy, electricity and infrastructure that we think should make Tunisia one of the next decade’s winners in Africa and Frontier markets. In terms of literacy, Tunisia is a decade ahead of Egypt and 15 years ahead of Morocco.