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CORE VIEWS
We continue to believe that Tanzania's current account will remain in a double-digit deficit over the coming years, as import demand remains strong on the back of robust economic activity and ambitious infrastructure investment plans. Although exports will also grow, they are unlikely to do so at a pace sufficient to offset import growth. Natural gas production has the potential to materially alter Tanzania's external position. However, given a dearth of details on a likely production schedule, we have refrained from incorporating this factor into our existing forecasts.
Although Tanzania's fiscal account will remain in deficit and reliant on foreign assistance over the coming years, growing revenues and relative political stability mean that we believe that the situation is sustainable. That said, there will be several challenges for the authorities; the most crucial will be finding the right balance between deriving revenues from and attracting investment into the country's natural resources.
We believe that Tanzanian inflation will decline in 2013 thanks to energy and food price disinflation and beneficial statistical base effects.
MAJOR FORECAST CHANGES
We have downgraded our 2013 growth forecast for Tanzania to 7.1%, from 7.4% previously, on account of expectations for lower gold production growth. That said, we continue to believe that the economy will see annual growth of between 7.0% and 8.0% over the coming years thanks to strong investment and robust private consumption.
KEY RISKS TO OUTLOOK
The major risk to our outlook comes from the weather. Poor rains would not only exacerbate tight food supplies (food price inflation has been the major driver of rapidly rising headline inflation) but would also once again hamper hydroelectricity production, raising costs for businesses and, by extension, consumers.
The country's infrastructure deficit is another concern; a failure to make significant progress would very likely hold the economy back from reaching its significant potential.
CORE VIEWS
We continue to believe that Tanzania's current account will remain in a double-digit deficit over the coming years, as import demand remains strong on the back of robust economic activity and ambitious infrastructure investment plans. Although exports will also grow, they are unlikely to do so at a pace sufficient to offset import growth. Natural gas production has the potential to materially alter Tanzania's external position. However, given a dearth of details on a likely production schedule, we have refrained from incorporating this factor into our existing forecasts.
Although Tanzania's fiscal account will remain in deficit and reliant on foreign assistance over the coming years, growing revenues and relative political stability mean that we believe that the situation is sustainable. That said, there will be several challenges for the authorities; the most crucial will be finding the right balance between deriving revenues from and attracting investment into the country's natural resources.
We believe that Tanzanian inflation will decline in 2013 thanks to energy and food price disinflation and beneficial statistical base effects.
MAJOR FORECAST CHANGES
We have downgraded our 2013 growth forecast for Tanzania to 7.1%, from 7.4% previously, on account of expectations for lower gold production growth. That said, we continue to believe that the economy will see annual growth of between 7.0% and 8.0% over the coming years thanks to strong investment and robust private consumption.
KEY RISKS TO OUTLOOK
The major risk to our outlook comes from the weather. Poor rains would not only exacerbate tight food supplies (food price inflation has been the major driver of rapidly rising headline inflation) but would also once again hamper hydroelectricity production, raising costs for businesses and, by extension, consumers.
The country's infrastructure deficit is another concern; a failure to make significant progress would very likely hold the economy back from reaching its significant potential.
Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
CHAPTER 1: POLITICAL OUTLOOK
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
No Easy Answers To Addressing Discontent In Zanzibar
Recent unrest in the archipelago of Zanzibar shows that discontent continues to pervade the islands despite a 2010 power-sharing agreement having been signed by rival political parties. Given the complexity of the causes of the unrest, a lasting resolution will be difficult to achieve. Possible outcomes include outright secession of the archipelago, a rearrangement of the union in a forthcoming new constitution or a crackdown on perpetrators of unrest by the Tanzanian authorities in a bid to crush opposition.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Corruption And Reliance On Foreign Money High On The Agenda
We believe 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 10-year forecast 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
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
2013 GROWTH DOWNGRADE, BUT MEDIUM-TERM PROSPECTS REMAIN BRIGHT
We have downgraded our 2013 growth forecast for Tanzania to 7.1%, from 7.4% previously, on account of expectations for lower gold production growth. That said, we continue to believe that the economy will see annual growth of between 7.0% and 8.0% over the coming years thanks to strong investment and robust private consumption.
TABLE: ECONOMIC ACTIVITY
Balance Of Payments
Current Account Deficit To Persist
We continue to believe that Tanzania's current account will remain in a deep deficit for the foreseeable future, as import demand remains strong on the back of robust economic activity and ambitious infrastructure investment plans. Although exports will also grow, they are unlikely to do so at a pace sufficient to offset import growth. Natural gas has the potential to materially alter Tanzania's external position.
TABLE: CURRENT ACCOUNT
Monetary Policy
Disinflation To Continue
We believe that Tanzanian inflation will continue to decline in 2013 thanks to energy and food price disinflation and beneficial statistical base effects. The major risks to this expectation stem from a recurrence of drought and from a possible sell-off in the currency.
TABLE: MONETARY POLICY
Fiscal Policy
Fiscal Accounts Sustainable, But Challenges Ahead
Although Tanzania's fiscal account will remain in deficit and reliant on foreign assistance over the coming years, growing revenues and relative political stability mean that we believe that the situation is sustainable. That said, there will be several challenges for the authorities. In our view, finding the right balance between deriving revenues from and attracting investment into the country's natural resources will be the most crucial.
TABLE: FISCAL POLICY
CHAPTER 3: 10-YEAR FORECAST
The Tanzanian Economy To 2021
Strong Long-Term Growth Expected
With telecoms, food and drink, transport, construction, energy and mining forecast to be drivers of growth in the years ahead, and with conditions supportive for long-run productivity gains in the important agricultural sector, we are projecting robust economic expansion over the next 10 years. The weather is likely to remain the key risk to our outlook owing to the country's dependence on hydroelectricity and the agricultural sector.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
CHAPTER 4: BUSINESS ENVIRONMENT
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
Institutions
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
TABLE: BMI LEGAL FRAMEWORK RATING
TABLE: LABOUR FORCE QUALITY
Infrastructure
TABLE: AFRICA – ANNUAL FDI INFLOWS
TABLE: TRADE AND INVESTMENT RATINGS
Market Orientation
TABLE: TOP EXPORT DESTINATIONS (US$MN)
Operational Risk
CHAPTER 5: KEY SECTORS
Infrastructure
Other Key Sectors
TABLE: AUTOS SECTOR KEY INDICATORS
TABLE: PHARMA SECTOR KEY INDICATORS
TABLE: TELECOMS SECTOR KEY INDICATORS
CHAPTER 6: BMI GLOBAL ASSUMPTIONS
Global Outlook
Downward Revisions, But Core Views Remain Unchanged
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST
Core Views
Major Forecast Changes
Key Risks To Outlook
CHAPTER 1: POLITICAL OUTLOOK
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
No Easy Answers To Addressing Discontent In Zanzibar
Recent unrest in the archipelago of Zanzibar shows that discontent continues to pervade the islands despite a 2010 power-sharing agreement having been signed by rival political parties. Given the complexity of the causes of the unrest, a lasting resolution will be difficult to achieve. Possible outcomes include outright secession of the archipelago, a rearrangement of the union in a forthcoming new constitution or a crackdown on perpetrators of unrest by the Tanzanian authorities in a bid to crush opposition.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Corruption And Reliance On Foreign Money High On The Agenda
We believe 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 10-year forecast 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
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
2013 GROWTH DOWNGRADE, BUT MEDIUM-TERM PROSPECTS REMAIN BRIGHT
We have downgraded our 2013 growth forecast for Tanzania to 7.1%, from 7.4% previously, on account of expectations for lower gold production growth. That said, we continue to believe that the economy will see annual growth of between 7.0% and 8.0% over the coming years thanks to strong investment and robust private consumption.
TABLE: ECONOMIC ACTIVITY
Balance Of Payments
Current Account Deficit To Persist
We continue to believe that Tanzania's current account will remain in a deep deficit for the foreseeable future, as import demand remains strong on the back of robust economic activity and ambitious infrastructure investment plans. Although exports will also grow, they are unlikely to do so at a pace sufficient to offset import growth. Natural gas has the potential to materially alter Tanzania's external position.
TABLE: CURRENT ACCOUNT
Monetary Policy
Disinflation To Continue
We believe that Tanzanian inflation will continue to decline in 2013 thanks to energy and food price disinflation and beneficial statistical base effects. The major risks to this expectation stem from a recurrence of drought and from a possible sell-off in the currency.
TABLE: MONETARY POLICY
Fiscal Policy
Fiscal Accounts Sustainable, But Challenges Ahead
Although Tanzania's fiscal account will remain in deficit and reliant on foreign assistance over the coming years, growing revenues and relative political stability mean that we believe that the situation is sustainable. That said, there will be several challenges for the authorities. In our view, finding the right balance between deriving revenues from and attracting investment into the country's natural resources will be the most crucial.
TABLE: FISCAL POLICY
CHAPTER 3: 10-YEAR FORECAST
The Tanzanian Economy To 2021
Strong Long-Term Growth Expected
With telecoms, food and drink, transport, construction, energy and mining forecast to be drivers of growth in the years ahead, and with conditions supportive for long-run productivity gains in the important agricultural sector, we are projecting robust economic expansion over the next 10 years. The weather is likely to remain the key risk to our outlook owing to the country's dependence on hydroelectricity and the agricultural sector.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
CHAPTER 4: BUSINESS ENVIRONMENT
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
Institutions
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
TABLE: BMI LEGAL FRAMEWORK RATING
TABLE: LABOUR FORCE QUALITY
Infrastructure
TABLE: AFRICA – ANNUAL FDI INFLOWS
TABLE: TRADE AND INVESTMENT RATINGS
Market Orientation
TABLE: TOP EXPORT DESTINATIONS (US$MN)
Operational Risk
CHAPTER 5: KEY SECTORS
Infrastructure
Other Key Sectors
TABLE: AUTOS SECTOR KEY INDICATORS
TABLE: PHARMA SECTOR KEY INDICATORS
TABLE: TELECOMS SECTOR KEY INDICATORS
CHAPTER 6: BMI GLOBAL ASSUMPTIONS
Global Outlook
Downward Revisions, But Core Views Remain Unchanged
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST
