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Tanzania Business Forecast Report Q3 2014

  • June 2014
  • -
  • Business Monitor International
  • -
  • 49 pages

Core Views

We forecast real GDP growth of 6.9% in 2014. This is a slight downwards revision, as goods exports decline and government implementation of development projects falls behind schedule. Growth will nevertheless remain robust from 2015 to 2018 as the consumer base grows and investment flows into the nascent offshore gas sector.
Tanzania’s current account deficit will widen over the coming years, which will make the country increasingly dependent on financial and capital inflows to maintain its positive balance of payments. As a result, the government must be careful not to alienate potential investors through increasingly overt resource nationalism regarding
its nascent offshore gas sector.

Although we forecast that Tanzania’s budget deficit will decline to 3.8% of GDP this fiscal year, from 5.0% last year, we caution that this obscures a number of risks. The country is heavily reliant on grants to meet its obligations, falling gold prices are constraining tax revenues, and interest costs on debt are rising.


Major Forecast Changes

R eal GDP growth in 2014 has been revised down from 7.1% to 6.9%.

Table Of Contents

Tanzania Business Forecast Report Q3 2014
Executive Summary. 5
Core Views..5
Major Forecast Changes5
Key Risks To Outlook5
Chapter 1: Political Outlook. 7
SWOT Analysis.. 7
BMI Political Risk Ratings 7
Domestic Politics.. 8
Corruption To Be Key Election Issue...8
Corruption will be a key issue during the campaign for the 2015 election. Although the deep-rooted nature of the practice means that
meaningful progress in addressing it is unlikely in the near future, we do not expect the ruling CCM party to cede power over the issue.
Table: POLITICAL OVERVIEW .8
Long-Term Political Outlook 9
Corruption And Reliance On Foreign Money High On The Agenda...9
Tanzania will continue to enjoy broad political stability over the coming decade, with little to suggest that the ruling Chama Cha
Mapinduzi party's authority will be threatened. That is not to say the 2013-2022 period will be without challenges. Chief among these will
be dealing with high levels of corruption and addressing the country's dependence on foreign aid.
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Ratings... 13
Economic Activity .. 14
Gas Investment And Consumers To Power Growth..14
We forecast real GDP growth of 6.9% in 2014. This is a slight downwards revision, as goods exports decline and government
implementation of development projects falls behind schedule. Growth will nevertheless remain robust from 2015 to 2018 as the
consumer base grows and investment flows into the nascent offshore gas sector.
tab le: Ec onomic Acti vit y..14
Fiscal Policy. 16
Small Fiscal Deficit Belies Risks16
Although we forecast that Tanzania's budget deficit will decline to 3.8% of GDP this fiscal year, from 5.0% last year, we caution that
this obscures a number of risks. The country is heavily reliant on grants to meet its obligations, falling gold prices are constraining tax
revenues, and interest costs on debt are rising.
table: Fiscal Policy16
Monetary Policy... 18
Inflationary Pressures To Moderate...18
We have revised down our end-2014 inflation forecast for Tanzania on the back of a moderating outlook for food price growth through
the remainder of the year. Nevertheless, we expect that the central bank will pursue a relatively tight monetary policy, as inflation
remains above its target.
tab le: Moneta ry Polic y18
Balance Of Payments.. 19
Declining Gold Prices To Widen C/A Deficit..19
Tanzania's current account deficit will widen over the coming years, which will make the country increasingly dependent on financial and
capital inflows to maintain a positive balance of payments position. As a result, the government must be careful not to alienate potential
investors through increasingly overt resource nationalism regarding its nascent offshore gas sector.
TABLE: Current Account...20
Chapter 3: 10-Year Forecast... 23
The Tanzanian Economy To 2023... 23
Robust Growth Forecast On Gas Investment23
We are forecasting a period of robust growth in the Tanzanian economy in the years ahead, as the country looks set to benefit from
its nascent offshore gas sector, and the investment being pumped in to the country to develop this. Increasing regional integration and
significant investment in infrastructure projects will also boost growth. The county remains beholden to the weather, however, through
the importance of its agricultural sector and dependence on hydroelectricity, and this presents the greatest risk to our forecasts.
TABLE : Long-Term Mac roeconomic Forecasts 23
Chapter 4: Business Environment. 27
SWOT Analysis 27
BMI Business Environment Risk Ratings.. 27
Business Environment Outlook. 28
Institutions... 28
TABLE : BMI BUSINE SS AND OPER ATION RISK RATINGS28
Tab le: BMI LE GAL FRAMEWOR K RATING.29
Table: LABOUR FORCE QUALITY..30
Infrastructure... 31
Market Orientation... 32
TABLE: ANNUAL FDI INFLOWS32
Tab le: TRADE AND INVE STMEN T RATINGS.33
TABLE: TOP EXPORT DESTINATIONS, 2004-2011.34
Operational Risk.. 35
Chapter 5: Key Sectors.. 37
Power ... 37
TABLE: Total Electricity Generation Data And Forecasts, 2012-2017.. 38
TABLE: Total Electricity Generation Data And Forecasts, 2018-2023.. 39
Other Key Sectors... 45
Tab le: Aut os Sect or Key Indicat ors...45
Tab le: Food and Drink Sect or Key Indicat ors.45
Tab le: Pharma Sect or Key Indicat ors45
Tab le: Telecoms Sect or Key Indicat ors46
Tab le: Oi l and Gas Sect or Key Indicat ors.46
Tab le: Infrast ructu re Sect or Key Indicat ors...46
Chapter 6: BMI Global Assumptions. 47
Global Outlook. 47
Emerging Market Deceleration47
Tab le: Globa l Assumpti ons.47
Table: Developed States, Real GDP GrowtH, %...48
Tab le: BMI VER SUS BLOO MBER G CON SEN SUS RE AL GDP GRO WTH FORE CASTS, %. 48
Tab le: Em ergi ng Markets , Real GDP Growt h, %..49

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