ON JUNE 26, an assault on the Tunisian beach resort of Sousse killed at least 39 people and injured 36, mostly tourists. On March 18, a terrorist attack on the Bardo National Museum in Tunis killed 23 foreign tourists.These attacks pose a major threat to Tunisia’s new democracy and are causing major losses in an economy already in recession.In 2014, tourism and travel accounted for about 15 percent of Tunisia’s Gross Domestic Product. These sectors employed 470,000 people, 14 percent of the country’s total employment, and generated almost 13 percent of exports and nearly eight percent of investment. Foreign tourism has been declining for some years.From the peak year of 2008 to 2014, the number of foreign visitors fell 14 percent and in the first three months of 2015, it dropped 19 percent from the first quarter of 2014. Since 2012, the economy has experienced slow growth rates – about 2.5 percent a year – too slow to impact the high 15 percent unemployment rate.Despite years of strong economic growth prior to the revolution that removed the authoritarian government of Zine El-Abidine Ben Ali that had controlled the country for decades, Tunisia has experienced growing inequalities in opportunities to obtain good jobs, resulting in rising unemployment, especially among young people.That situation further deteriorated in the wake of the global economic crisis in 2008-2009 and during the transition to democracy that began in 2011. Regional inequalities were sharp. In 2010, the official poverty rate was 15.5 percent, while in the West Central region, with a population of about 1.4 million, it was more than 32 percent. Extreme poverty was 4.6 percent and in the West Central region, it was over 14 percent.The lack of inclusive growth was a key factor behind the unrest that led to the revolution in 2010-2011. The economy deteriorated sharply in the aftermath of the revolution, as both tourism and foreign direct investment fell, and the crisis in neighboring Libya had negative effects with tens of thousands of Tunisian migrant workers returning home, and European countries taking tougher stances on immigration. These developments also limited the option of migration that had helped to contain unemployment. In the first quarter of 2015, the overall unemployment rate was 15 percent. In 2014, nearly 40 percent of the population was under the age of 24 and youth unemployment (15-24 year olds) exceeded 42 percent.Since the revolution, the first in the so-called Arab Spring, Tunisia has been considered its sole success. But the reality is more complex. Some 3,000 Tunisians have joined extremist groups in Syria, with most fighting for the Islamic State, and Tunisia is the world’s largest source of foreign fighters to the conflicts in Syria and Iraq. Under Ben Ali’s regime, freedom of expression and Islamist movements were violently suppressed.Since the revolution, Tunisia has had two free elections, but also four years of acrimonious debate on everything from the wording of the new constitution to the role of Islam in a democracy.The first post-revolution government was led by Ennahda, a moderate Islamist party that promised fidelity to religion, as well as pragmatic rule. Its leaders were tolerant of Salafi groups such as Ansar al-Shari’a, which advocated a strict interpretation of Islam, including the establishment of a caliphate and shari’a law. In 2013, the Ennahda government outlawed Ansar al-Shari’a after the group assassinated two leftist politicians, but critics blamed Ennahda for allowing Salafism to spread in the country.In the October 2014 general elections, the secular Nidaa Tounes party replaced Ennahda in power, but the Islamist party remains a critical part of Tunisia’s governing coalition. Nidaa Tounes has brought together former members of Ben Ali’s Constitutional Democratic Rally, secular leftists, progressive liberals and Destourians (followers of Tunisia’s first president, Habib Bourguiba). In addition, the party has the support of many members of the Tunisian General Labor Union and the national employers’ union, UTICA.The International Monetary Fund and the Organization for Economic Cooperation and Development have, in recently published reports, welcomed the political change in Tunisia and have called for economic reform. These reforms will have to deal with poverty, inequality and unemployment, especially among the young ‒ some of whom have been attracted by extreme Islamist thinking and terrorist movements.The new democracy must offer economic hope. Reforms, however, are harder to implement when economic growth is slow, and the effects of the terrorist attacks have been to weaken Tunisia economically and reduce the resources available for urgently needed investments.