Fragile Tunisian Economy May Feel Deep Sting from Terror Attack

Tunisia has been in the process of economic reform and liberalization following decades of state interventionism left the economy on the verge of collapse. While growth has been moderate, it sustained for over a decade. Unfortunately, that growth trend may have ended, along with the lives of at least 38 people, due to a horrific terrorist attack on Saturday.

Tunisia has been in the process of economic reform and liberalization following decades of state interventionism left the economy on the verge of collapse. While growth has been moderate, it sustained for over a decade. Unfortunately, that growth trend may have ended, along with the lives of at least 38 people, due to a horrific terrorist attack on Saturday.

Tunisia’s economic growth relied, in large part, on tourism. By some estimates, tourism comprises nearly 20 percent of Tunisia’s economy. In an interview with the Financial Times, Moaz al-Joudi, chairman of the Tunisian Governors’ Association, and a former economist at the University of Tunis, said that “The hit was done by those who knows Tunisia’s economic situation well and are intent on its collapse…We have been relying on tourism to keep the country going.”

Of the 38 so far confirmed dead, and the dozens more injured, the victims originated from 17 different nations including England, Ireland, Germany, Belgium, and Portugal. In fact, some believe as many as 30 of the victims may have been English. While European tourists once flocked to the beach by the hundred, just a day after the attack the remaining foreign visitors in Tunisia’s many beachfront resorts were mostly staying indoors and awaiting flights out of the country.

Tunisia is a relatively resource poor nation, so its reliance on tourism is not surprising. Unfortunately, tourism is an industry based largely on reputation, and the image of a nation unable to protect its visitors from terrorist attacks will crush that industry, at least in the short term. Unfortunately, Saturday’s attack was not the first targeting tourists in Tunisia; a prior attack on a Tunis museum in March claimed 21 lives, but largely flew under the international radar.

Unfortunately, these attacks have exposed how vulnerable Tunisia truly is, and many expect terrorist groups to continue their assaults in an effort to destabilize the existing regime. Joudi expressed concern that these assaults would affect the economy as a whole, not just the tourism sector. For example, the loss of tourism revenues could harm the financial sector, which heavily invests in Tunisian tourism. “They need to get people to pay back the loans. Now, that will be really difficult,” he said. “It will be hard to even keep local confidence up.”

Locals say the gunman involved in Saturday’s attacked used to work in the region’s summer tourism sector before becoming a radical. This contributed to his ability to pick a spot that would have the most impact on the Tunisian economy. Analysts have noted that he carefully avoided areas predominantly populated by locals and visitors from the Middle East, instead focusing on a spot frequented by European tourists.