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Boston, MA -- (SBWIRE) -- 05/05/2014 -- We have made a slight downgrade to our 2014 growth forecast for Tanzania, from 7.3% to 7.1%, largely on the back of underperforming exports which, coupled with strong imports of capital goods, will see net exports remain a drag on growth. However, we maintain our outlook for robust growth on the back of investment flows into the nascent offshore gas sector.
We forecast that Tanzania's budget deficit will narrow from 5.1% in 2012/13 to 3.7% of GDP in fiscal 2013/14, and will remain around 4.0% over the next several years. This reduction will happen even as revenue growth is likely to disappoint this year, as a result of delays to project implementation.
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We forecast a widening current account deficit in Tanzania in 2014 and believe that the shortfall will remain substantial over the medium term, as exports are hit by falling prices and imports related to the offshore oil and gas sectors grow. Nevertheless, inflows of foreign investment will keep the country in a balance of payments surplus.
Key Risks To Outlook
The major risk to our economic outlook comes from the weather. Poor rains would not only exacerbate tight food supplies (food price inflation was the major driver of rapidly rising headline inflation in 2011) but would also once again hamper hydroelectricity production, raising costs for businesses and, by extension, consumers.
The country's infrastructure deficit is another concern; a failure to make significant progress would likely hold the economy back from reaching its significant potential.
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