Country Report Tanzania April 2009

Outlook for 2009-10

• The president, Jakaya Kikwete, will continue to face the most challenging period of his presidency as economic growth is hit by the global downturn, but the fragmented opposition is unlikely to be able to pose a challenge.
• The ruling Chama Cha Mapinduzi (CCM) is likely to choose Mr Kikwete as its candidate in the 2010 presidential election. He is expected to win, but with a smaller majority on a lower turnout as the electorate expresses its discontent.
• The slowdown in the world economy has pushed the government into revisiting its economic policy assumptions and it may loosen fiscal policy. It will stick to its pursuit of market-orientated reforms but progress will be slow.
• The global slump will hurt the economy via a slowdown in foreign direct investment, trade and tourism. The Economist Intelligence Unit forecasts real GDP growth of 4.5% in 2009 and 5% in 2010.
• Inflation will ease as food priceswhich account for over 50% of the consumer price indexfall in line with global trends. We therefore forecast an average inflation rate of 9.5% in 2009 and 6.3% in 2010.
• The current-account deficit is forecast to narrow to an average of 10.5% of GDP in 2009-10 as a result of high gold prices, a strong performance from manufacturing exports and a slump in the oil price.

Monthly review

• The Zanzibar government has reasserted its claims to any benefits from the potential discovery of oil in the waters surrounding the isles, saying that all revenue should accrue to it and not the mainland.
• The inflammatory language from the ruling CCM party on Zanzibar represents the beginning of the 2010 election campaign. The first battle will be with the mainland CCM over the partys Zanzibari presidential candidate.
• Changes to the mining tax regime are emerging as important policy issues in the 2009/10 budget. The budget may include a modest increase in royalty rates and the end of some incentives such as tax exemptions on fuel imports.
• The IMF has argued that the government should consider a fiscal stimulus. It is probably not feasible for the government to boost spending significantly but it may maintain current plans and borrow to meet revenue shortfalls.
• Domestic revenue for the first half of the 2008/09 fiscal year (July-June) grew by 24% compared with the previous year but was 6% lower than budgeted.
• The agricultural sector is set for a reasonable performance in 2009, owing to decent rains, high food-price inflationwhich led farmers to switch to more lucrative food-crop productionand government efforts to distribute fertiliser.

Source: Country Report

This report covers the following industry codes:
SIC Code: 15;39;49;60;10
NAICS Code: 23;31;11;22;52;212