Tunisia’s already modest economic recovery almost halted in 2023, amidst a severe drought, tight financing conditions and the modest pace of implementing reforms. With this slowdown, the Tunisian economy in 2023 was still below its pre-Covid level, marking one of the slowest recoveries in the Middle East and North African region. Agriculture was the main driver of the2023 economic slowdown, declining by 11 percent as the drought forced the government to introduce irrigation restrictions. This highlights the urgency for Tunisia to adapt to climate change. The weak domestic demand and the fiscal consolidation appear to have added to the drought-related losses, with the declines in construction and commerce sectors offsetting some of the gains from export markets, particularly tourism. The growth slowdown–especially in labor-intensive sectors–translated into higher unemployment and lower labor force participation.