Tanzania Business Forecast Report Q1 2014

Date: December 18, 2013
Pages: 45
Price:
US$ 1,195.00
Publisher: Business Monitor International
Report type: Strategic Report
Delivery: E-mail Delivery (PDF)
ID: T5C9C2983AEEN
Leaflet:

Download PDF Leaflet

Core Views

Investment into Tanzania’s nascent offshore gas sector will more than offset poor export performance in the country in 2014 and 2015. This will keep the real GDP growth rate at around 7.3% for the next several years.

We believe that Tanzania’s budget deficit will widen as a proportion of GDP in the next several years, testing the country’s commitment to IMF programmes. With tax revenues falling, pressure will build for the country to reform its tax exemptions for companies. BMI believes that monetary policy will be loosened in Tanzania. Inflationary pressures continue to diminish, and the latest headline growth reading coming in below target provides impetus to spur growth. With a stable shilling and record foreign reserves, the Bank of Tanzania has ample tools to support this.

Voices within the Tanzanian parliament have called for the country to leave the East African Community (EAC) regional bloc, amid tensions with Rwanda and concerns that the country is being sidelined. While we do not envisage the departure of Tanzania from the organisation, we caution that such disputes could serve to hinder growth in the region.

Major Forecast Changes

No major forecast changes

Key Risks To Outlook

The major risk to our economic outlook comes from the weather. Poor rains would not only exacerbate tight food supplies (food price inflation was the major driver of rapidly rising headline inflation in 2011) 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 likely hold the economy back from reaching its significant potential.

A meaningful deterioration in Tanzania’s investment profile as a result of protests against major investment projects or as a result of a more populist approach to policymaking could deter much needed foreign investment. Growth would not only be disrupted by the cancellation of projects but also by a deterioration in macro stability that would result from an accompanying balance of payments crisis.
Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook

CHAPTER 1: POLITICAL OUTLOOK

SWOT Analysis
BMI Political Risk Ratings
Foreign Policy
East African Participation Characterised By Reluctance
Voices within the Tanzanian parliament have called for the country to leave the East African Community (EAC) regional bloc, amid tensions with Rwanda and concerns that the country is being sidelined. While we do not envisage the departure of Tanzania from the organisation, we caution that such disputes could serve to hinder growth in the region.
  Table: POLITICAL OVERVIEW
Long-Term Political Outlook
Corruption And Reliance On Foreign Money High On The Agenda
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

SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Gas Investment To Boost Growth
Investment into Tanzania's nascent offshore gas sector will more than offset poor export performance in the country in 2014 and 2015. This will keep the real GDP growth rate at around 7.3% for the next several years.
  Table: ECONOMIC ACTIVITY
Monetary Policy
Monetary Policy To Loosen As Disinflation Continues
BMI believes that monetary policy will be loosened in Tanzania. Inflationary pressures continue to diminish, and the latest headline growth reading coming in below target provides impetus to spur growth. With a s Table shilling and record foreign reserves, the Bank of Tanzania has ample tools to support this.
  Table: MONETARY POLICY
Balance of Payments
Current Account Deficit Remaining Substantial
As gold prices fall, and capital goods imports are set to rise, we forecast that Tanzania's current account deficit will remain substantial in 2014 and beyond. However, the overall balance of payments in Tanzania will remain positive, thanks to significant investment inflows - the offshore gas sector will be a key driver of this.
  Table: CURRENT ACCOUNT
Fiscal Policy
Tax Shortfall To Raise Pressure For Reform
We believe that Tanzania's budget deficit will widen as a proportion of GDP in the next several years, testing the country's commitment to IMF programmes. With tax revenues falling, pressure will build for the country to reform its tax exemptions for companies.
  Table: FISCAL POLICY

CHAPTER 3: 10-YEAR FORECAST

The Tanzanian Economy to 2022
Robust Growth Forecast On Gas Investment
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 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
Market Orientation
  Table: ANNUAL FDI INFLOWS
  Table: TRADE AND INVESTMENT RATINGS
  Table: TOP EXPORT DESTINATIONS, 2004-2011
Operational Risk

CHAPTER 5: KEY SECTORS

Infrastructure
Other Key Sectors
  Table: Pharma Sector Key Indicators
  Table: Telecoms Sector Key Indicators

CHAPTER 6: BMI GLOBAL ASSUMPTIONS

Global Outlook
Mixed Q313 Data, But Outlook Has Not Changed
  Table: Global Assumptions
  Table: Developed States, Real GDP GrowtH, %
  Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
  Table: Emerging Markets, Real GDP Growth, %

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