Country Report Tanzania June 2009

Summary

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 government is committed to promoting private-sector growth by reforming the weak legal system, reducing corruption and encouraging public-private partnerships, but progress will be slow.
The global slump will hurt the economy through 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 10.2% in 2009 and 7% in 2010.
The current-account deficit is forecast to narrow to an average of 10.6% 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.

In May Mr Kikwete became the first African president to meet the US president, Barack Obama, since his election. Talks included terrorism and piracy as the Horn of Africa becomes more important to US foreign policy.
The CCM secured two easy by-election victories in May. However, in a potential precursor to the 2010 election, turnout at a by-election on the mainland was low, as over 50% of registered voters did not cast a ballot.
A new Medium-Term Public Investment Plan to channel funds more efficiently to infrastructure priorities will become operational in July.
Inflation appears to have peaked as the inflation rate fell to 12% year on year in April, the lowest rate since October 2008. Food price inflation eased in April and fuel, power and water prices actually fell.
Stability in the shilling and a fall in inflation has given the central bank confidence to allow interest rates to ease and the Treasury-bill rate fell from over 12% in March to 7.63% by the end of May.
A government order in 2008 that that all milk produced in Tanzania had to be processed locally has backfired. A Kenyan firm, Brookside, withdrew from the market and the price of raw milk has fallen from Tsh400/litre to Tsh150/litre.

Source: Country Report

This report covers the following industry codes:
SIC Code: 10;60;70;49;20;47;37;65
NAICS Code: 212;52;72;22;11;311;48;336;53