Weeks of unrest in Tunisia will hit economic growth, frighten away tourists and discourage foreign direct investment which could fall by up to a third this year, Fitch Ratings said on Thursday.

In an analysts' call on North Africa on Thursday, Fitch cut its 2011 growth forecast for Tunisia to 2 percent from 5 percent and said it would make a decision on whether to downgrade its sovereign rating in 3 to 6 months.

Fitch on Jan 14. put Tunisia's long-term foreign currency credit rating of BBB on watch for a potential downgrade, hours before president Zine al-Abdine Ben Ali fled the country after weeks of protests against police rule and poor living standards.

We see a big shock to growth this year, said Charles Seville, a director on Fitch's sovereign team. We see economic recovery next year provided there is a stable government.

The Tunisian uprising has inspired Arabs across the Middle East, where authoritarian rule and youth unemployment are common themes. While Fitch downplayed the risk of Tunisia-style revolts in Morocco or Egypt, they said the political risk had risen.

In Tunisia, the sector worst-affected by protests is the tourism sector, which Seville said employs about 400,000 people in a country of 10 million that suffers high unemployment.

Thousands of tourists were evacuated as protests reached a head earlier this month, though hotels say January was the middle of the low season for the Mediterranean country.

The worst affected sector was tourism, which was suffering anyway, Seville said. There will be a third drop in foreign direct investment although in the long term this could recover.

However, most foreign investment in Tunisia was in the oil and gas sector and that was not likely to be badly hit, he said.

The effects of the unrest on Tunisia's small stock market were unclear as the bourse has remained closed since Jan 17.


Fitch welcomed the appointment of Mustafa Kamel Nabli as central bank governor in the aftermath of Ben Ali's departure.

Nabli has said that Tunisia could delay a sovereign debt issue that had been planned for 2011, but Seville said he had reassured markets that Tunisia would pay its debts.

Fitch now expects Tunisia to dip into its foreign exchange reserves to repay about $1.3 billion of debt due this year, leading to a commensurate decline in reserve levels.

The previous government presided over stable policies, he said, adding that it had cut its debt load over the past decade.

Government debt was worth about 40-41 percent of gross domestic product in 2010, versus 60 percent in 2001, he said.

Businesses owned by Ben Ali and his family now face an uncertain future, Seville said, which could hit their creditors.

Tunisians complain that Ben Ali and his family accumulated vast wealth at the expense of the people and the government has pledged to track down his assets. Many say Ben Ali's family took a cut in any major Tunisian enterprises, leaving little incentive for those without connections to set up a business.

With the dead weight of corruption lifted off the private sector, we could see a new lease of life, Seville said.