Tunisia continues fiscal stimulus in 2010 budget

TUNIS (Reuters) - Tunisia's attempts to prop up domestic demand with higher state spending will continue next year as the government sets aside more money for development projects, according to a summary of its 2010 budget.

Government spending is set to grow by 5.4 percent to 18.3 billion dinars next year, according to the summary published by official news agency TAP on Tuesday.

The value of unspecified development projects will grow 18 percent to 4.6 billion dinars, TAP said. State salaries will grow by around 8 percent to 6.83 billion dinars as the government seeks to create 16,000 state jobs.

Officials say the unemployment rate is 14 percent with 88,000 new job seekers entering the market each year.

The extra payroll spending "demonstrates the importance placed on social matters in the state budget through the acceleration of the employment rate and the consolidation of buying power," TAP said.

Consumer prices in Tunisia are forecast to grow 3.4 percent next year after rising 3.5 percent in 2009, according to the International Monetary Fund.

The government estimates gross domestic product at 3.5 percent this year, down from 5.1 percent in 2008 as the global economic downturn hits demand for exports.

Tunisia, a country of 10 million, relies heavily on tourism and wants to build on a reputation as a cheap, business friendly base for offshore services and industrial exports.

TAP said the government aimed to make Tunisian firms more competitive, boost labour-intensive investments and create more export opportunities by making industry more flexible.

The government boosted state spending in a 2009 mid-year budget, a move that was welcomed in June by the IMF as necessary to support domestic demand during the global economic downturn.

The Fund said at the time that the fiscal stimulus should continue in 2010 until the global economic recovery strengthens.