Tanzania breaks the mould to stay on strong growth track in 2020

One of the truckloads of maize imported from Tanzania’s bumper harvest last year waits to be offloaded at a miller in Mombasa. FILE PHOTO | NMG 

In Summary

• Standard Chartered Bank’s 2020 Economic Outlook Report for East Africa released on January 29, notes that an easing of the country’s monetary policy in 2018-19 had allowed private sector credit extension to start accelerating again after a 2017 slowdown.

By DOROTHY NDALU
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Tanzania's inflation rate is expected to rise from 3.4 per cent in 2019 to 4.2 per cent in 2020 despite a robust economic growth of 6.5 per cent in 2020 compared with 6.6 per cent in 2019.

Standard Chartered Bank’s 2020 Economic Outlook Report for East Africa released on January 29, also notes that an easing of the country’s monetary policy in 2018-19 had allowed private sector credit extension to start accelerating again after a 2017 slowdown.

“The current account deficit will likely stay wide in 2020. While we have revised our 2019 deficit forecast to 4.2 per cent of GDP (previous 5.6 per cent), we see it expanding in 2020 to 4.5 per cent (previous 5.5 per cent) of GDP due to higher imports,” the report says.

Oil hiccups
Sarah Baynton-Glen, the bank’s Africa economist, said Tanzania’s current blueprint to improve the business environment, accommodative monetary policy, and public infrastructure investment were all good pillars supporting further economic growth this year.

“Agriculture should be a key growth driver in 2020, and the government is targeting $2 billion of annual horticulture exports by 2025. Resolution of issues arising from state intervention in agriculture and mining should also provide a more positive backdrop to growth in 2020,” Ms Baynton-Glen added.

She also noted that the country’s foreign exchange market is also likely to be boosted by greater cashew exports and the recent resumption of gold and copper concentrates exports following an agreement between the government and Barrick Gold.

The report notes that in 2019, the country's trade deficit increased on higher capital goods and oil imports, despite higher gold exports, which increased 26 per cent year-on-year in the year to September 2019 due to higher prices and the resumption of cashew exports.

The report offers mixed predictions for Kenya and Uganda.

On Uganda, chief economist in charge of Africa Razia Khan said “delays to first oil” were likely to weaken near-term growth prospects, causing it to lower 2020 and 2021 growth forecasts to 6.0 and 6.2 per cent respectively from 6.2 and 6.5 per cent prior.

“Uganda’s fiscal policy challenges will remain centred on raising its low rate of revenue collection. Ideally, the authorities want to see a gradual increment of at least 0.5 percentage point of GDP in revenue each year. And, achieving sustained progress in revenue mobilisation, especially with elections approaching, has traditionally been a challenge,” Ms Khan said.

The report noted that although the full impact of the regional locust invasion was difficult to assess, food prices have already been pressured higher from a low base by December flooding in eastern Uganda.

“The Bank of Uganda can be expected to keep its policy rate on hold at 9.0 per cent throughout 2020, having previously seen scope for more easing,” it said.

It added that pending elections in 2021 and rising caution over the extent of the government’s public financing requirement meant the Bank of Uganda was likely to adopt a tighter policy stance with 200 barrels per day of rate hikes in 2021.