Fast Market Research recommends "Tanzania Business Forecast Report Q4 2013" from Business Monitor International, now available
Boston, MA -- (SBWIRE) -- 10/31/2013 -- Robust private consumption and investment spending, combined with weak import growth, will offset an expected subdued performance for exports and keep the Tanzanian economy expanding by more than 7.0% in 2013 and 2014.
Tanzania's current account deficit is set to expand over the coming years as demand for imports surges and gold prices fall. At this juncture, we believe that capital and financial account inflows will be sufficient to cover the forecasted shortfall. The balance of payments position could, however, come under pressure if the current account deficit ends up being wider and/or if capital and financial account inflows end up being lower than we currently anticipate.
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We believe the period of disinflation, which has seen price growth fall from 19.8% in December 2011 to 7.5% in July 2013, is coming to an end, as demand-pull pressure and a looser monetary policy will prevent headline inflation from falling much lower than 6.5%. That said, we do not think inflation will head higher rapidly after it has bottomed thanks to prudent monetary policy, a stable shilling and ample food supplies.
Friction between the governments of Tanzania and Rwanda, which has been rising since May, will likely dissipate over the medium term as the incentives for cooperation between the two states outweigh those for hostility. Even so, the volatile situation in the eastern Democratic Republic of the Congo could see tensions between Kigali and Dodoma flare, which would in turn pose a risk to economic and political integration in the East African Community.
Major Forecast Changes
No major forecast changes
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 very likely hold the economy back from reaching its significant potential.
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