Country Report Tanzania February 2009

Outlook for 2009-10

• The president, Jakaya Kikwete, will continue to face the most challenging period of his presidency as high inflation erodes living standards. However, 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 government will stick to its pursuit of market-orientated reforms, including the promotion of private-sector growth by improving infrastructure and maintaining macroeconomic stability, but progress will be slow.
• The global slump will hurt the Tanzanian economy via a slowdown in foreign investment, trade and tourism, and the Economist Intelligence Unit forecasts annual real GDP growth of 5.7% in 2009 and 6.1% in 2010.
• Inflation will ease as food prices—which account for over 50% of the consumer price index—fall in line with global trends. We therefore forecast an average inflation rate of 8.8% in 2009 and 6.3% in 2010.
• High capital imports will keep the trade account in deficit, and we forecast wide current-account deficits of 12.4% of GDP in 2009 and 11.4% of GDP in 2010.

Monthly review

• The CCM candidate, Luckson Mwanjali, comfortably won a by-election in Mbeya Rural on January 25th, taking advantage of poor organisation as the leading opposition candidate was disqualified on a technicality.
• The government is looking at options for infrastructure financing after postponing plans to issue a sovereign bond. The IMF has argued that it should raise funds from donors or domestic debt rather than external borrowing.
• The ports authority has been ordered to auction all containers at the Dar es Salaam port that are not collected within 21 days. The average number of days it took to clear goods at the port increased from 17 in 2007 to 25 in 2008.
• The inflation rate rose to 13.5% year on year in December, the highest since 1998. It is expected to trend down in 2009 as global food and fuel prices ease, although the pace of this moderation also depends on the Tanzanian harvest.
• The Tanzanian Coffee Board expects coffee production to fall to 50,000 tonnes in 2009/10 (May-April) following poor rains, less than an expected crop of 60,000 tonnes in 2008/09 but still above the average harvest of recent years.
• A technical fault at Kidatu hydroelectric power station caused a new wave of power cuts in Dar es Salaam in mid-January. Demand for dollars to buy generator fuel may partly explain the weakness in the shilling in late January.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1;20;49;60;70
NAICS Code: 11;311;22;52;72