Country Report Tanzania October 2009

Outlook for 2010-11

• The president, Jakaya Kikwete, will remain fairly popular as he enters the final year of his first term, despite slowing economic growth, continued corruption scandals and high inflation that is hurting living standards.
• The ruling Chama Cha Mapinduzi (CCM) is likely to choose Mr Kikwete as its candidate in the presidential election in late 2010. He is expected to win, but with a smaller majority on a lower turnout as voters express their discontent.
• Foreign investment, trade and tourism will pick up slowly, but a sluggish global recovery will hinder Tanzania's economic performance. The Economist Intelligence Unit forecasts real GDP growth of 5.5% in 2010 and 6% in 2011.
• Inflation will ease but stubbornly high food prices and a global oil price of around US$70 will prevent it from falling faster. We forecast an average inflation rate of 9% in 2010 and 7.5% in 2011.
• A more stable economic outlook, an easing of demand for foreign exchange and periodic intervention from the central bank is forecast to stabilise the average exchange rate at TSh1,328:US$1 in 2010 and TSh1,350:US$1 in? 2011.
• The current-account deficit is forecast to widen to 10.1% of GDP in 2010, driven by rising oil prices, capital import growth and a fall in the gold price. It is forecast to narrow to 8.2% of GDP in 2011 as tourism growth picks up.

Monthly review

• The president publicly acknowledged delays in the prosecution of corruption cases, blaming a heavier caseload. The number of corruption cases before the courts is 578 (including 27 of grand corruption), up from 50 four years ago.
• Problems with voter registration on Pemba have continued as police fired on villagers in Pemba North. Meanwhile, a proposal by the CUF to suspend the registration process was rejected by the electoral commission and the CCM.
• Preliminary figures from the 2008/09 (July-June) budget outturn show that domestic borrowing was ten times higher than budgeted to compensate for a shortfall in donor grants, which were 20% lower than expected.
• The central bank is considering gradually allowing foreigners to buy Treasury bills, but it is concerned about market volatility due to large external investors.
• The World Bank has reduced its planned concessional lending by 14% over the next three years, as Tanzania dropped seven places in its annual borrowers assessment. This may also lead other donors to reduce aid.
• Bucking the global trend, foreign direct investment (FDI) rose to US$744m in 2008, from US$647m the previous year. However, the Tanzania Investment Centre expects FDI to decline by around 10% in 2009 as projects are delayed.

This report covers the following industry codes:
SIC Code: 10
NAICS Code: 212