Boston, MA -- (ReleaseWire) -- 01/07/2014 -- Investment into Tanzania's nascent offshore gas sector will more than offset poor export performance in the country in 2014 and 2015. This will keep the real GDP growth rate at around 7.3% for the next several years.
We believe that Tanzania's budget deficit will widen as a proportion of GDP in the next several years, testing the country's commitment to IMF programmes. With tax revenues falling, pressure will build for the country to reform its tax exemptions for companies.
BMI believes that monetary policy will be loosened in Tanzania. Inflationary pressures continue to diminish, and the latest headline growth reading coming in below target provides impetus to spur growth. With a stable shilling and record foreign reserves, the Bank of Tanzania has ample tools to support this.
Voices within the Tanzanian parliament have called for the country to leave the East African Community (EAC) regional bloc, amid tensions with Rwanda and concerns that the country is being sidelined. While we do not envisage the departure of Tanzania from the organisation, we caution that such disputes could serve to hinder growth in the region.
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Major Forecast Changes
No major forecast changes
Key Risks To Outlook
The 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.
The country's infrastructure deficit is another concern; a failure to make significant progress would likely hold the economy back from reaching its significant potential.
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