Population 43.019 million
GDP 27.978 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
7 |
6.4 |
6.6 |
7 |
|
Inflation (yearly average) (%)
|
7 |
12.7 |
15.6 |
9.8 |
|
Budget balance (% GDP)*
|
-11.2 |
-9.8 |
-9.3 |
-8.7 |
|
Current account balance (% GDP)
|
-9.3 |
-13.7 |
-15.4 |
-13.4 |
|
Public debt (% GDP)
|
42.7 |
45.4 |
46.8 |
48.7 |
| (e) Estimate (f) Forecast * grants excluded |
||||
STRENGTHS
- Extensive mining resources (gold, gas) and presence of uranium, coal, iron ore and oil
- Upmarket tourist sector
- Major player in the Great Lakes region
- Political stability and democratic system
- International support
WEAKNESSES
- Shortcomings in transport, production, water conveyance and treatment infrastructures
- Heavy dependence on hydroelectric energy which suffers frequent breakdowns
- Poor agricultural productivity
- Poverty and inadequate health and education systems
- High youth unemployment
- Zanzibar archipelago’s desire for independence
- Heavy dependence on international aid and mineral exports
Risk assessment
Strong growth driven by the mining sector
Growth as sustained in 2012 by major investments in the mining sector, driven by the discovery of new offshore gas reserves. The country has also benefitted from exports, mainly of agricultural products and gold. The latter enjoys strong demand from investors worried about the current global economic climate. On the supply side, the dynamic sectors are transport, communications, and industry. However, industrial activity remains greatly hampered by the many power failures due to the malfunctioning electricity network (essentially hydro-electric). Despite this, growth is expected to be sustained in 2013, driven by the mining sector. External demand is also expected to remain strong, above all for gold, which expected to retain its role as a safe haven. Moreover, because of the country’s substantial natural gas reserves, foreign investment is expected to increase strongly, enabling the construction of infrastructures and the eventual reduction in the use of the largely inadequate hydroelectric energy.
Finally inflation is expected to ease in 2013 after the peak reached in 2012 thanks to lower food and oil prices – especially since the Central Bank is likely to continue to intervene to stabilise the exchange rate against the dollar and thus limit imported inflation.
External accounts hit by the energy crisis and still dependent on international aid
Importing twice as much as it exports, the country posted a high current account deficit in 2012. The rise in exports (especially of gold, which represents 45% of exports) is not enough to offset the high level of oil product imports (30% of imports), which make up the gap caused by the oil crisis experienced since mid-2011. The country also imports a large quantity of capital goods and services for the exploration and exploitation of natural resources. The deficit is expected to fall in 2013 thanks to a growth in exports, while imports are expected to decline and to benefit from a slightly lower price per barrel of Brent compared with the past year. Foreign Direct Investments will make it possible to cover practically half the deficit, while foreign aid is expected to cover a quarter.
Fiscal deficit 50% covered by foreign aid
The country’s 2012 fiscal deficit is high but lower than that of 2011 thanks to improved tax collection and to the rise in certain taxes and royalties (gold mines). The deficit is expected to decline in 2013 reflecting continuing efforts by the government to increase revenues. However spending will remain high: higher civil service salaries, subsidies to farmers and public service companies and continuation of the poverty reduction programme. The country will remain heavily dependent on foreign aid to cover over half its deficit. In this context, public debt will be high and is expected to increase, as the state continues to borrow in order to fund major construction projects (a gas pipeline with the TPDC) and to fund the activities of the national electricity company, Tanesco.
Political stability
In 2012, President Kikwete and his party, the CCM, were shaken by the corruption scandals which led to a major ministerial reshuffle. President Kikwete, who is finishing his second and last 5-year term, is trying to ease the tensions in a divided party faced with an opposition (Chadema) which has greatly strengthened its political base. The opposition has gained in popularity among a population angered by the corruption scandal, high inflation and frequent electricity failures. In 2013, the CCM, which will then have designated the party’s candidate for the forthcoming 2015 elections, is expected to discuss a new constitution in response to the opposition’s criticism regarding an excessively powerful executive. Occasional demonstrations by the opposition could occur in 2013 but this is unlikely to threaten the country’s stability. Moreover, relations with Zanzibar (an autonomous administration) are expected to be less tense due to the agreement signed at the end of 2012 allowing the archipelago to control the surrounding gas reserves and to grant exploration licences.
