(Ecofin Agency) - On October 16, 2018, Moody’s downgraded Tunisia’s outlook from stable to negative due to an increased external vulnerability in an increasingly challenging external environment.

The rating of this north African country whose economy has been painfully recovering since the 2011 popular uprising against former president Ben-Ali was affirmed at B2.

The American rating agency explained that this downgrading reflects the increased vulnerability to external factors in a context of tightening global financing conditions while the country’s foreign reserves weakened due to increased oil prices and a decrease in net capital inflows compared to last year’s.

Moody's forecasts a slight narrowing of the current account deficit supported by rising services exports. However, this deficit could still be as high as 9.7% of GDP by the end of 2018 before dropping to 8.5% in 2019 against 10.2% in 2017.

The rating agency further pointed out that the state budget was sensitive to external financing conditions and exchange rates fluctuations since 65% of the public debt is denominated in foreign currencies. The local currency lost 11% against the US Dollar and 9.2% against the Euro in the first nine months of 2018.

Moody’s also indicated that proofs of steady reduction of trade and fiscal imbalances, as well as a sustained increase of the foreign reserve, could support a change of the outlook from “negative” to “stable”.