A broad improvement in macroeconomic conditions will see real GDP growth in Tanzania accelerate in 2016. Following an estimated 6.0% expansion in 2015, we forecast growth of 6.5% this year as the economy benefits from improved currency stability, a post-election bounce in investment and low oil prices.
The Tanzanian shilling (TZS) will experience a much less rapid pace of depreciation in 2016 than in 2015 as it benefits from a weaker US dollar, positive balance of payments dynamics and improved local sentiment. Having depreciated by an average of 22.4% against the dollar last year, we forecast average depreciation in 2016 of just below 8.0%.
Since being sworn in almost three months ago, new Tanzanian President John Magufuli has made impressive and publicly-visible efforts aimed at tackling corruption and government waste, reinforcing his reputation as a hard-working technocrat. While the Magufuli presidency is still in its infancy, the early signs are encouraging and, if sustained, bode well for the country's relationship with its donor partners following a fractious 18 month period .
A 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.
Political risk is set to increase over the near term, which could provide a sterner examination of Magufuli's leadership credentials. The controversial decision to annul and re-run the Zanzibar election, now scheduled for March 20, has stoked popular discontent on the semi-autonomous island, and it promises to be a tense few months.
|Real GDP growth, % y-o-y||7.0||6.0||6.5||6.4|
|Nominal GDP, USDbn||47.8||43.3||45.5||49.3|
|Consumer price inflation, % y-o-y, eop||4.8||6.5||6.5||6.5|
|Exchange rate TZS/USD, eop||1,733.00||2,149.33||2,246.05||2,358.35|
|Budget balance, % of GDP||-2.8||-4.3||-3.5||-3.1|
|Current account balance, % of GDP||-10.2||-8.1||-7.0||-7.4|
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