How structural water scarcity is emerging as the new systemic risk to the Tunisian economy, even as the recovery remains fragile.
Key figures 2026. Sources: National Institute of Statistics, Central Bank of Tunisia, Ministry of Finance, World Bank calculations.
The Tunisian economy is breathing again, but it is holding its breath. After years of lackluster growth, the country records a 2.4% rise in real GDP in the first half of 2026, confirming the momentum that began in 2025.
This figure, seemingly reassuring, masks a more fragmented reality: agriculture rebounding after drought, an industry that is contracting, a labor market that is slipping again after ten quarters of job creation. And in the background, a constraint that conventional macroeconomic models still incorporate too little: water.
Because beneath the growth curves and budget ratios lies a deeper equation. Tunisia belongs to the small group of countries most exposed to water stress in the world, with renewable freshwater availability of about 380 cubic meters per capita per year, well below the absolute shortage threshold set at 500 cubic meters. This scarcity is no longer a distant climatic scenario. It has become, according to projections, a variable capable of weighing directly on the country’s economic trajectory.
These findings draw on the Economic Outlook Bulletin for Tunisia published by the World Bank Group in the summer of 2026, titled “The Water Challenge in Tunisia: From Scarcity to Resilience,” whose analysis combines recent macroeconomic developments with an in-depth diagnosis of the water sector.
A real recovery, but low intensity
The growth in 2025, driven by an 11.7% rebound in agriculture and solid performance of mechanical and electrical industries, allowed real GDP to sustainably surpass its pre-pandemic level. But momentum faces headwinds. The conflict in the Middle East has pushed up energy bills, the trade deficit widened to 8.1% of GDP in the first seven months of 2026, and the growth outlook for the year was revised downward, from 2.5% to 2.3%.
The labor market illustrates this fragility. After ten consecutive quarters of net job creation, the economy destroyed 58,000 jobs in the second quarter of 2026, with a loss concentrated at 72,000 positions among women, partially offset by 14,000 creations among men. The female unemployment rate, at 21.6%, remains nearly double the male rate. The recovery, in short, has not yet restored the equity it promised.
The external account under pressure, debt increasingly domesticated
On July 14, 2026, foreign exchange reserves fell by 2.47 billion dinars in a single day to honor the repayment of a Eurobond issued in 2019, reducing import coverage from 101 days to 92 days.
This episode, seemingly isolated, reveals growing dependence on exceptional financing and the domestic market. The share of domestic debt in total public debt rose from 29.7% in 2019 to 60.8% in 2025, a shift that begins to crowd out credit for the private sector and fuel latent inflationary pressures.
The budget deficit, expected at 6.0% of GDP in 2026 versus 5.3% in 2025, and a public debt peaking at 84.2% of GDP before a slow decline, outline a narrow margin of maneuver for the state. It is precisely in this constrained budget space that the water issue enters, no longer as an ancillary environmental priority, but as a macroeconomic risk in its own right.
Water, the variable Tunisia can no longer ignore
The World Bank’s assessment is unequivocal: without corrective measures, economic losses linked to water scarcity could reach 6.4% of GDP by 2050, with agricultural value added falling by nearly 29% compared with a reference scenario.
Agriculture, which employs 14% of the national workforce and up to 50% of rural workers, concentrates the majority of this exposure. But the risk extends far beyond this sector: tourism, agri-business, and textiles, collectively responsible for a substantial share of wage employment, all depend on a reliable water supply.
The relief provided by the hydrological year 2025–2026, with reservoir levels rising to 60% or 70% after a historic low of 19% in December 2024, should not mislead. The underlying trajectory, driven by population growth and climate change, points to a structural and widening gap between water supply and demand. A third of groundwater withdrawals remain unauthorized, signaling governance to be reinvented as much as a resource to be preserved.
Macroeconomic benchmarks, 2025 to 2028
| Indicator | 2025 | 2026p | 2027p | 2028p |
| Real GDP growth (%) | 2.7 | 2.3 | 2.2 | 2.1 |
| Average inflation (%) | 5.5 | 5.5 | 5.0 | 4.5 |
| Current account balance (% GDP) | -2.3 | -4.1 | -3.5 | -3.1 |
| Fiscal balance (% GDP) | -5.3 | -6.0 | -5.6 | -4.7 |
| Public debt (% GDP) | 82.5 | 84.2 | 83.1 | 81.9 |
p: World Bank staff projections. Source: World Bank Group, Economic Outlook Bulletin for Tunisia, Summer 2026, Table 2.
When investing in water creates jobs
The most promising angle of this diagnosis may lie in its reversal of perspective. Water security is not only a prerequisite for growth; it is a direct driver of it.
The RESEau program, endowed with 700 million dollars over ten years and approved in March 2026, illustrates this potential: its initial phase alone should generate about 4,000 permanent jobs and 13,400 temporary jobs. The cost per permanent job created, around $33,000, compares favorably with the national average of $37,000 for public investment, making the water sector one of the most efficient uses of available public capital.
Three projects to transform constraint into resilience
The government roadmap, the Water Plan 2050, lays solid strategic foundations. Its success, however, will depend on three institutional reforms that the Bulletin identifies as decisive.
The first concerns the legal framework: modernizing the Water Code, unchanged since 1975, conditions the control of illegal withdrawals and the opening to desalination. The second touches the financial viability of the sector, where cost recovery rates range from 107% for potable water distribution to only 50% for irrigation, calling for a gradual tariff adjustment accompanied by social mechanisms.
The third focuses on operational performance, with network losses reaching 23% for drinking water and 30% for irrigation, and the potential for treated wastewater reuse largely untapped, only ten percent of the 300 million cubic meters produced annually currently valued.
What this means for economic decision-makers
For investors and public officials, the Bulletin’s central message goes beyond the water sector alone. It invites rethinking country risk analysis by incorporating a dimension hitherto peripheral: water availability as a direct determinant of sectoral competitiveness, employment, and budgetary stability.
In a context where fiscal room for maneuver is tightening and external financing remains limited, water governance becomes a forward-looking indicator to track on par with inflation or public debt. Tunisia has a clear strategy. Its ability to translate it into measurable results will determine, more than any other factor, the economic resilience of the coming decade.
Source : World Bank Group, Economic Outlook Bulletin for Tunisia, “The Water Challenge in Tunisia: From Scarcity to Resilience,” Summer 2026. Additional data: INS, Central Bank of Tunisia, Ministry of Finance, MARHP.
