New Country Reports market report from Business Monitor International: "Tanzania Business Forecast Report Q1 2013"

Boston, MA -- (SBWire) -- 03/13/2013 --Core Views

We continue to believe that Tanzania's current account will remain in a double-digit deficit over the coming years, as import demand remains strong on the back of robust economic activity and ambitious infrastructure investment plans. Although exports will also grow, they are unlikely to do so at a pace sufficient to offset import growth. Natural gas production has the potential to materially alter Tanzania's external position. However, given a dearth of details on a likely production schedule, we have refrained from incorporating this factor into our existing forecasts.

Although Tanzania's fiscal account will remain in deficit and reliant on foreign assistance over the coming years, growing revenues and relative political stability mean that we believe that the situation is sustainable. That said, there will be several challenges for the authorities; the most crucial will be finding the right balance between deriving revenues from and attracting investment into the country's natural resources.

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We believe that Tanzanian inflation will decline in 2013 thanks to energy and food price disinflation and beneficial statistical base effects.

Major Forecast Changes

We have downgraded our 2013 growth forecast for Tanzania to 7.1%, from 7.4% previously, on account of expectations for lower gold production growth. That said, we continue to believe that the economy will see annual growth of between 7.0% and 8.0% over the coming years thanks to strong investment and robust private consumption.

Key Risks To Outlook

The major risk to our outlook comes from the weather. Poor rains would not only exacerbate tight food supplies (food price inflation has been the major driver of rapidly rising headline inflation) but would also once again hamper hydroelectricity production, raising costs for businesses and, by extension, consumers.

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