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Tanzania Country Risk Report Q1 2016

  • December 2015
  • -
  • Business Monitor International
  • -
  • 41 pages

Core Views

Tanzania’s investment climate will feel the effects of continued policyuncertainty over the coming quarters, which will keep economicgrowth below potential. Despite the passing of a peaceful and largelycredible election on October 25 that in the end saw the incumbentChama Cha Mapinduzi (CCM) party post a relatively comfortablevictory, a number of lingering political issues will keep economicoutput below potential and growth someway short of its five-yeartrend levels.Economic growth in Tanzania will feel the effects of policy uncertaintyin the energy and mining sectors up to, and likely well beyond, thegeneral election on October 25. While we expect growth to returnto trend from mid-2016 onwards, risks to the medium-term growthpicture are increasingly to the downside.Putting post-electoral uncertainty to one side, we believe thatMagufuli’s position as president is secure and his mandate solid.

A former public works minister, he is regarded as an effective andhard-working technocrat. His credentials as leader and statesmanare less proven, and his ability to exert influence and direct eventswill depend on how quickly he can build a power base and networkwithin the party.Monetary policy in Tanzania is likely to remain relatively tight overthe coming months, despite an improving inflation outlook and easingexternal pressures on the shilling. While the shilling has been morestable in recent months amid more supportive conditions for EMcurrencies generally, we believe the authorities are likely to maintaina hawkish monetary policy bias for a time longer given the potentialfor further bouts of EM risk-on sentiment.

Table Of Contents

Tanzania Country Risk Report Q1 2016
Executive Summary 5
Core Views5
Key Risks5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Index 7
Domestic Politics 8
New President Faces Early Challenges8
Ruling party candidate John Magufuli has won Tanzania's presidential election, securing a comfortable mandate However, the
annulment of Zanzibar's election result amid widespread claims of vote-rigging has heightened tensions This uncertainty will weigh on
the near-term political picture
TABLE: POLITICAL OVERVIEW 8
Long-Term Political Outlook 9
Corruption And Reliance On Foreign Money High On The Agenda9
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 2015-2023 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 Index 13
Economic Growth Outlook 14
Policy Headwinds To Keep Growth Below Potential In 201614
Following a challenging 2015, economic conditions in Tanzania are set to improve modestly over the coming quarters, with real GDP
growth climbing to 60% in 2016 That said, lingering policy uncertainty, particularly in the energy sector, will continue to weigh on the
investment climate
GDP By Expenditure Outlook 15
TABLE: GDP GROWTH FORECASTS15
TABLE: PRIVATE CONSUMPTION FORECASTS15
TABLE: GOVERNMENT CONSUMPTION FORECASTS15
Monetary Policy 16
Bank of Tanzania To Remain Cautious In Q116 Despite Improving Conditions16
Monetary policy in Tanzania is likely to remain relatively tight over the coming months, despite an improving inflation outlook and easing
external pressures on the shilling
TABLE: FIXED INVESTMENT FORECASTS16
TABLE: NET EXPORTS FORECASTS16
Monetary Policy Framework 17
Currency Forecast 18
TZS: Depreciatory Forces To Lessen As External Conditions Improve18
The Tanzanian shilling will depreciate at a far more modest pace in 2016 than in 2015 thanks to more favourable external dynamics
However, there is nothing compelling in the fundamentals to suggest that a meaningful turnaround is on the cards
Banking Sector Update 19
Banking Sector Growth To Remain Resilient19
The spread of mobile financial services, buoyant economic growth and a low statistical base will see asset growth in Tanzania remain
robust over the coming years Credit will continue to be the main engine of growth within the sector
TABLE: BMI CURRENCY FORECAST19
TABLE: BANKING SECTOR RISK SNAPSHOT20
Chapter 3: 10-Year Forecast23
The Tanzanian Economy To 202423
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 MACROECONOMIC FORECASTS23
Chapter 4: Operational Risk27
SWOT Analysis27
Operational Risk Index27
Operational Risk28
TABLE: OPERATIONAL RISK 28
Education29
TABLE: EDUCATION RISK - SSA30
Government Intervention 33
TABLE: GOVERNMENT INTERVENTION RISK - SSA34
Chapter 5: BMI Global Macro Outlook39
Global Outlook39
Emerging Markets Bending, Not Breaking39
TABLE: GLOBAL ASSUMPTIONS39
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %40
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %40
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %41

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