Tanzania's real GDP growth will far outstrip its Sub-Saharan African counterparts in 2016 and 2017. While a pull-back in international aid will temper growth modestly, the country will benefit from strong investment and low inflation.
We expect Tanzania's monetary policy to remain tight in 2016, in an effort to cool credit growth and keep inflation near the target rate of 5.0%. Moreover, in 2017, with economic growth set to remain relatively robust and inflationary pressures poised to reaccelerate, we see little scope for loosening.
Tanzanian President John Magufuli's reforming policies and anti-graft measures will support economic growth over the coming years. A strong mandate will enable him to continue these policies, although increasing resistance from senior politicians and civil servants will slow the reform momentum.
Tanzania runs a consistently negative net international investment position, with net liabilities having grown to 67.2% from 40.0% of GDP in 2010. This is largely due to the stock of inward FDI and government debt liabilities from international financial institutions. We expect inward FDI flows to increase over the next few years, particularly in the energy sector due to the joint oil pipeline project with Uganda and a number of onshore natural gas discoveries. Portfolio investment is currently insignificant as Tanzania's capital markets lack depth. However, we expect this to represent more of the net investment deficit in the years to come as the country steps up its Eurobond issuance for development projects, and market capitalisation in Tanzania's companies grows.
|e/f=BMI estimate/forecast. Source: BMI, TBoS, BoT, UN|
|Real GDP growth, % y-o-y||7.0||7.1||6.8||6.7|
|Nominal GDP, USDbn||47.8||43.8||46.2||50.1|
|Consumer price inflation, % y-o-y, eop||4.8||6.8||4.3||7.7|
|Exchange rate TZS/USD, eop||1,733.00||2,149.33||2,246.05||2,358.35|
|Budget balance, % of GDP||-2.8||-4.2||-3.5||-3.0|
|Current account balance, % of GDP||-10.5||-7.6||-6.7||-6.1|
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