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Tanzania's economy seen expanding by 6.8% in 2011

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  1. Ndahani

    Ndahani JF-Expert Member

    Aug 27, 2010
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    By: Reuters

    Tanzania's economy should grow 6.3 percent this year and 6.8 percent in 2011, thanks to robust activity in all sectors, while inflation will stay in single digits through to 2011, a Reuters poll of nine economists showed on Tuesday.

    A previous poll in March had projected economic growth of a median of 5.1 percent in 2010.
    The east African economy mainly depends on tourism, mining and agriculture and is increasingly attracting more investor interest in telecommunications, energy, manufacturing, financial services and transport.

    "Across the board, all sectors of Tanzania's economy are expected to pick up pace this year and in 2011," said Thalma Corbett, chief economist at NKC Independent.

    "Overall though, entrenched constraints such as poor energy supply and transport infrastructure, in addition to excessive bureaucracy, will keep growth below potential."

    The government expects economic output to grow by 7.0 percent in 2010, from 6.0 percent last year.
    The International Monetary Fund sees Tanzania's economy growing 6.7 percent in 2011, compared with an estimated 6.2 percent this year. It expects growth to accelerate to 7.5 percent by 2012/13.

    "Our core view is for strong economic growth given the fact that Tanzania's relatively stable political climate and abundant natural resources should see foreign private sector investment continue to flow in," said Matthew Searle of Business Monitor International.

    Analysts said one impediment to growth was Tanzania's reliance on foreign donors to support its fiscal budget. In the 2010/11 (July-June), 28 percent of its 11.6 trillion shilling budget will come from foreign loans and aid.


    Consumer price inflation is expected to average 8.0 percent in 2010 and 7.7 percent in 2011, according to the poll.

    Tanzania's annual inflation rate fell to 6.3 percent in July from 7.2 percent in June, helped by lower food prices.

    "Since October 2009 inflation has pursued a clear downward trajectory, with the slowing of food inflation taking most of the credit for overall inflation falling," said Corbett.

    The government aimed to have inflation below 6 percent by June. The IMF expects inflation to ease to 5.0 percent by the end of June 2011.

    Analysts say Tanzania's current account deficit is forecast to widen to 8.0 percent of GDP in 2010, and to 9.2 percent next year, but the rising price of gold on the world market should cushion costly oil imports.
    Gold export earnings in Africa's third largest producer rose 15.4 percent in 2009 to $1.1 billion.

    Tanzania's current account deficit widened to $2.63 billion in the year to June, from $2.53 billion in the same period a year ago, according to the latest Bank of Tanzania figures.

    "A sustained reduction in donor financing could place pressure on the country's balance of payments position," Searle said.

    The budget's fiscal deficit is expected to stand at -5.1 percent of GDP this year, and shrinking slightly to -5.0 percent of GDP in 2011, according to the poll.

    "As is evident from the 2010/11 (July/June) fiscal budget, the government is expected to continue with its expansionary fiscal policy (commenced in 2008), which should keep some pressure on the fiscal balance in 2010-11," said Corbett.