Boston, MA -- (SBWIRE) -- 06/05/2013 -- Core Views

We are forecasting the Tanzanian economy to grow by 7.1% y-o-y in 2013 up from an estimated 7.0% in 2012 driven by robust private consumption and investment.

We maintain our view that inflation will continue to decline in Tanzania, reaching 7.8% by the end of 2013. This is largely thanks to prudent monetary and fiscal policy keeping a lid on demand-side inflationary pressures.

An improving macroeconomic climate will allow Tanzanian banks to benefit from attractive structural dynamics due to a low base and a healthy real GDP growth outlook. Furthermore, the proliferation of mobile money services should accelerate the uptake of banking services while high net interest margins bode well for bank profitability.

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Raids of gold mines and violent protests against a planned gas pipeline in southern Tanzania are a sign of growing discontent stemming from a sense that average citizens are not benefitting from the country's mineral wealth. Although we do not think that these isolated incidents are likely to escalate into widespread unrest, we do believe that risks will build the longer that concerns go unaddressed.

Major Forecast Changes

No major forecast changes

Key Risk To Outlook

The major risk to our 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.

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