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Tanzania Country Risk Report Q2 2016

Tanzania Country Risk Report Q2 2016

Core Views 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 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.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Growth Accelerating In 2016
Economic growth in Tanzania will accelerate in 2016 due to improved currency stability, post-election investment, and low oil prices.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Monetary Policy
External Risks Will Keep Monetary Conditions Tight Through H116
Despite the improved outlook for the currency, monetary conditions are set to remain tight through the first half of the year given external
risks and above target inflation.
Monetary Policy Framework
Currency Forecast
TZS: Conditions More Supportive In 2016
The Tanzanian shilling 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.
TABLE: BMI CURRENCY FORECAST
Regional Fiscal
The Future Of African Bond Issuance
Sub-Saharan African Eurobond issuance is becoming increasingly expensive. We identify two implications therefrom. One is that local
currency debt issuance is likely to rise and the local debt markets will develop, as in Nigeria and Kenya. Meanwhile, eurobond markets
will become more selective and reward those countries whose macroeconomic frameworks are stable, especially in West Africa.
Chapter 2: 10-Year Forecast
The Tanzanian Economy To 2025
High Growth Hinges On Gas Investment
We are forecasting a period of robust growth in the Tanzanian economy in the years ahead, as the country looks set to benefit from
its nascent offshore gas sector, and the investment being pumped in to the country to develop this. Increasing regional integration and
significant investment in infrastructure projects will also boost growth. The county remains beholden to the weather, however, through
the importance of its agricultural sector and dependence on hydroelectricity, and this presents the greatest risk to our forecasts.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Zanzibar Poll Re-Run Could Shorten Magufuli Honeymoon
John Magufuli has made a bright start to his presidency, making impressive early strides to address the country's endemic corruption
problems. That said, a politically charged re-run of Zanzibar's October election is a significant cloud on the near term horizon.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Corruption And Reliance On Foreign Money High On The Agenda
Tanzania will continue to enjoy broad political stability over the coming decade, with little to suggest that the ruling Chama Cha
Mapinduzi party's authority will be threatened. That is not to say the 2015-2023 period will be without challenges. Chief among these will
be dealing with high levels of corruption and addressing the country's dependence on foreign aid.
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Trade Procedures And Governance
TABLE: IMPORT AND EXPORT DOCUMENTS
TABLE: TRADE PROCEDURES BREAKDOWN
TABLE: SUB-SAHARAN AFRICA – TRADE PROCEDURES AND GOVERNANCE RISK
Vulnerability To Crime
Chapter 5: BMI Global Macro Outlook
Global Macro Outlook
Tail Risks Mounting Amid Sub-Par Growth
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%)
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: MACROECONOMIC DATA & FORECASTS

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