Tanzania Business Forecast Report Q3 2012

Date: July 1, 2012
Pages: 35
Price:
US$ 1,195.00
Publisher: Business Monitor International
Report type: Strategic Report
Delivery: E-mail Delivery (PDF)
ID: TBEE822D70CEN
Leaflet:

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Includes 3 FREE quarterly updates

Core Views We expect Tanzania's economy to recover in 2013 and forecast 7.5% growth, up from an expected 5.5% in 2012. Underpinning our forecasts is an expectation that falling inflation and recovering power generation will lead to an improvement in the domestic macroeconomic climate, while an increase in gold production and healthy economic outlooks for Tanzania's neighbours will boost the external sector as well. Inflation will decline only very slowly over the course of 2012 as falling food prices and improving base effects are partially offset by high energy prices. Although our relatively high end-2012 inflation forecast of 12.6% is largely driven by supply-side considerations, we expect that the Bank of Tanzania will keep the reins tight on monetary policy to stave off the prospect of demand-pull inflation and to support the currency. Defections from Chama Cha Mapinduzi (CCM) are a clear indication that all is not well in the ruling party in Tanzania. A looming succession battle and a rise in popularity of opposition Chama Cha Demokrasia Na Maendeleo will make life difficult for CCM leadership as it seeks to reverse the party's decline. Major Forecast Changes Revisions to 2011 data mean that Tanzania will post an even larger current account deficit in 2012 than we had previously forecast. A high oil import bill, strong demand for capital goods and relatively weak growth in gold exports will see the shortfall expand to US$4.21bn in 2012, from an estimated US$3.43bn in 2011. We believe things will improve from 2013, however, as new gold production and lower demand for and prices of oil lead to a narrowing of the shortfall to US$4.18bn that year. 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 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 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
Defections And Succession Headaches For Ruling Party
Defections from Chama Cha Mapinduzi (CCM) are a clear indication that all is not well in the ruling party in Tanzania. A looming
succession battle and a rise in popularity of opposition Chama Cha Demokrasia Na Maendeleo will make life difficult for the CCM
leadership as it seeks to reverse the party's decline.
  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.

CHAPTER 2: ECONOMIC OUTLOOK

SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Growth To Power Up In 2013
Tanzania's economy is expected to recover in 2013, and we forecast growth of 7.5%, up from an expected 5.5% in 2012. Underpinning
our forecasts is an expectation that falling inflation and recovering power generation will lead to an improvement in the domestic
macroeconomic climate, while an increase in gold production and healthy economic outlooks for Tanzania's neighbours will boost the
external sector as well.
  TABLE: ECONOMIC ACTIVITY
  TABLE: MAJOR GOLD MINE PROJECTS
Balance Of Payments
Current Account Shortfall To Balloon
Revisions to 2011 data mean that Tanzania will post an even larger current account deficit in 2012 than we had previously forecast.
A high oil import bill, strong demand for capital goods and relatively weak growth in gold exports will see the shortfall expand to
US$4.21bn in 2012, from an estimated US$3.43bn in 2011.
  TABLE: CURRENT ACCOUNT
Monetary Policy
Energy Prices To Keep Inflation Sticky
Inflation will decline only very slowly over the course of 2012 as falling food prices and improving base effects are partially offset by
high energy prices. Although our relatively high end-2012 inflation forecast of 12.6% is largely driven by supply-side considerations, we
expect that the Bank of Tanzania will keep the reins tight on monetary policy to stave off the prospect of demand-pull inflation and to
support the currency.
  TABLE: MONETARY POLICY
Fiscal Policy
Continued Focus On Capital Expenditure To Aid Infrastructure
The latest available fiscal data show a positive shift in Tanzanian government spending from current to capital expenditure. A
continuation of this trend would be positive for Tanzania's long-term economic development as it would go some way towards
addressing the country's poor infrastructure.
  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 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
Operational Risk

CHAPTER 5: BMI GLOBAL ASSUMPTIONS

Global Outlook
World Slows As Euro Crisis Simmers
  TABLE: GLOBAL ASSUMPTIONS
  TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST
  TABLE: REAL GDP GROWTH CONSENSUS FORECASTS
  TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST

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