Deindustrialization and growth in MENA countries: A focus on Tunisia

The aim of this paper is to analyze the pattern of deindustrialization in MENA countries, emphasizing its main features and its impact on overall growth, using long time series covering the 1960–2018 period. In light of the increasing importance of services in recent decades, the paper also explores the role of tertiarization, alongside manufacturing, in driving growth. The main results suggest that MENA countries began deindustrializing at low levels of GDP per capita, which is a sign of premature deindustrialization. As a result, they miss key manufacturing benefits and externalities such as technological diffusion, skills development and openness. The results also indicate that manufacturing weight exerts a positive effect on overall growth over the different considered periods in Tunisia, thus confirming its role as an engine of growth. However, this positive impact has declined over time, as manufacturing has been increasingly confined to low-technology, assembly, and outsourcing activities characterized by a lack of sophistication. Furthermore, there is no evidence to consider the service sector, in its current configuration and specialization, as an effective driver of growth and development. Indeed, the increasing weight of services over the last two decades has been primarily driven by low-productivity activities, such as trade (largely informal) and public services, and has relied to a lesser extent on modern, high-productivity activities.