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Tanzania growth seen at 6.4 pct in 2012
by Vuyani Ndaba

Reuters Translate This Article
30 July 2012

JOHANNESBURG (Reuters) - Tanzania will match 2011's growth rate this year, making it one of East Africa's fastest growing economies, and should accelerate in 2013 as investment in energy and consumer spending picks up, a Reuters poll showed on Monday.

East Africa's second biggest economy will expand 6.4 percent this year and then 6.9 percent in 2013 as foreign investment in gas industries rises and power production improves, according to the median of 10 analysts.

Those consensus forecasts were downgraded from 6.6 percent and 7.2 percent from a previous poll, respectively.

Drought and frequent power blackouts caused Tanzania's economic growth to slow to 6.4 percent in 2011, the government said last month.

'We expect growth to remain in a narrow range over the next two years. Investment spending is likely to underpin GDP growth,' said Phumelele Mbiyo, East Africa economist at CFC Stanbic Bank, a subsidiary of Standard Bank.

East Africa is also abuzz with intra-regional trade and neighbours Uganda and Kenya are expected to steam ahead as countries are increasingly doing more business jointly, easing an overreliance on recession-hit Europe.

Kenya's economy, the largest in the East African Community, is poised to expand 5 percent, while third-biggest Uganda could grow 4.8 percent this year.

Tanzania is also attracting rising foreign investor interest in its natural gas deposits. The government says reserves stand at more than 10 trillion cubic feet following recent discoveries.

'Economic growth is expected to increase during 2012-13 as foreign investment rises,' said Melissa van Rensburg of NKC Independent Economists, a consultancy that tracks African countries.

But van Rensburg pointed out that reforms to make business easier have stagnated in recent years, with Tanzania's ranking in the World Bank Doing Business survey falling from 125th in 2011 to 127th in 2012.

Like its other east African counterparts, Tanzania has battled high double-digit inflation over the past year, reducing consumers' food budgets and knocking spending.

Analysts expect inflation will 15.9 percent this year, before falling to 8.1 percent in 2013.

'Inflation should return to single digits in 2013, but remains vulnerable to disruptions in rainfall and bottlenecks in the domestic power sector,' said Mark Bohlund, senior economist, at IHS Global Insight.

East Africa's worst drought in 60 years in 2011 sent food prices skyrocketing and pushed inflation to 12.7 percent last year compared to 5.5 percent in 2010.

June inflation fell to 17.4 percent year-on-year from 18.2 percent the previous month, as food price rises slowed.

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