Protectionist
tendencies and erratic policy-making are likely to deter the kind of
private investment needed to help Tanzania achieve its industrialisation
goal within the next five years, a leading UK
think tank has predicted.
In its latest
country report for Tanzania published this month, the Economist
Intelligence Unit (EIU) also cautions that although President John
Magufuli remains a firm favourite to gain re-election, the continued
squeezing of political space within the country could fuel public
discontent in the run-up to the 2020 general election.
"Tanzania will
remain politically stable during the period 2020-24, but we expect some
volatility in the political landscape as electioneering picks up next
year," the report says.
It asserts that
early signs of this have already started emerging "amid speculation
about divisions within the ruling CCM party, owing to President
Magufuli's centralised style of leadership (as demonstrated by repeated
Cabinet reshuffles) and his intolerance to opposing views."
But the EIU is
confident that President Magufuli enjoys "sufficient support" within the
ruling CCM party to ensure he sails through on the back of the party's
"well-oiled party machinery" in 2020.
On the economic
front, the EIU believes that while rising public and private
infrastructure investment will support average economic growth of 5.8
per cent between 2020-2024, real GDP growth in those years will be lower
than the estimated 6.5 percent at present. This is because of declining
business confidence.
The Tanzanian
shilling will weaken from an estimated Tsh2,289 at present to Tsh 2,641
against the US dollar by 2024, due to twin fiscal and current-account
deficits pressure.
However, the EIU
cites competition for regional trade between Tanzania and Kenya, and the
impediments this is causing to the East African Community integration,
as a major risk scenario for Tanzania in the sense of triggering
"potential developments that might substantially change the country's
business operating environment over the coming two years."
"Periodic trade
disputes between the two biggest EAC economies will curb intra-EAC trade
flows (although) the EAC will remain eager to intervene and resolve
issues between the two during the forecast period," the report says.
Tanzania also faces
other profound risks like the possible enactment of "ill-conceived
import and export bans" that would lead to a sharp drop in trade, plus
the threat of business taxes being hiked "without prior consultation."
There is also the
risk of public corruption rearing its ugly head again and triggering a
new round of external aid freezes, although this is one area that even
critics of President Magufuli's (hardline) administration say it has
managed to control to a large extent.
The EIU says
Tanzania's official economic policy agenda will remain at odds with its
rhetoric as it continues to lean towards economic nationalism,
especially in the natural resources sector.
"Given our forecast
that Mr Magufuli will be re-elected in 2020, we expect trade policy to
retain a protectionist slant, thereby impeding the government's
envisaged growth trajectory. The mining industry will continue to be
particularly affected by a strict regulatory framework," the report
says.
Other sectors such
as natural resources are also expected to continue to suffer from
official protectionist policies, although more resilient sectors like
infrastructure are expected to continue to attract FDI inflows.
The EIU predicts
that services, which contribute almost 40 per cent of GDP, will be
another economic driver for Tanzania, spurred by trade, transport and
telecommunications.
"A boost to
tourism, provided in part by the expansion of Air Tanzania (the national
carrier), will also drive growth in services," it said.
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