Country Report Tanzania March 2009

Outlook for 2009-10

• The president, Jakaya Kikwete, will continue to face the most challenging period of his presidency as the global downturn has an impact on economic growth. However, the fragmented opposition is unlikely to be able to pose a challenge.
• The ruling Chama Cha Mapinduzi (CCM) is likely to choose MrKikwete 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 economy via a slowdown in foreign direct investment, trade and tourism. We have revised the real GDP growth forecast down to 4.5% in 2009 (previously 5.7%) and 5% in 2010 (previously 6.1%).
• 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 10.8% of GDP in 2009-10 as a result of high gold prices and a slump in the oil price.

Monthly review

• The Chinese president, Hu Jintao, has visited Tanzania where he inaugurated the Chinese-built national stadium and announced aid worth around US$20m, a small amount compared with most Western donors.
• The Zanzibar Electoral Commission has announced stringent new requirements for voter registration, which may make it harder for the CCM to register non-resident Zanzibaris to vote in the islands' elections.
• Monetary policy has been tightened as the Treasury bill rate, which was as low as 4.95% in May 2008, was raised to 12.26% in February. As inflation falls slowly, real interest rates are set to turn positive in the coming months.
• The governor of the central bank, Benno Ndulu, expects GDP growth to slow from 7.5% in 2008 to 5-6% in 2009 as the outlook for tourism and natural resources worsens in line with the global downturn.
• The government has waived import duty on maize until May 31st in order to encourage traders to import cereals. Food inflation was 18.2% in January, following a poor domestic harvest and high demand from Kenya.
• According to provisional data from the central bank, the current-account deficit widened to US$2,812m in 2008. This was driven by a sharp rise in imports, particularly oil (up by 23%) and capital goods (up by nearly 50%).

Source: Country Report

This report covers the following industry codes:
SIC Code: 1;39
NAICS Code: 11;31