Tanzania growth seen above 6% forecast

Prof Ndulu
Tanzania's central bank said on Wednesday that economic growth could beat its 6.0 percent forecast for fiscal year 2011/12, with inflation falling to single digits by the June year-end, despite power shortages and a sluggish global economy.

Africa's fourth-largest gold producer and east Africa's second-biggest economy has attracted major investment over the past decade but the disruption from last year's drought in the region slowed electricity production and knocked growth.

The central bank said Tanzania's economic performance and outlook for 2011/12 remained strong, with gross domestic product estimated to have grown by 6.3 percent in the first three quarters of 2011, compared with a 6 percent forecast for the whole calendar year.

"Based on the performance of most leading indicators in the fourth quarter of 2011, the projected growth of 6.0 percent for the year will be attained or even surpassed," the bank said in its mid-year review of the monetary policy statement.

Construction, transport and communication, and financial intermediation were among the sectors that saw improved growth in 2011, the bank said. It repeated its forecast for economic growth of 7.2 percent this calendar year.

The central bank said inflation is expected to fall to single digits by June 2012 as a result of fiscal policy measures it has taken, expected good rains, and a levelling of global oil prices.

Tanzania's year-on-year inflation rate eased marginally to 19.7 percent in January from 19.8 percent a month before.

"However, there are upside risks associated with instabilities in the Middle East and euro zone, which may exert pressure on inflation," the bank said, adding it would take additional measures to rein in core inflation and ensure financial sector stability.

The Tanzanian shilling hit a new all-time low of 1,850 against the dollar on October 28, but has bounced back after the central bank pumped dollars into the market. The shilling was trading at 1,588/1,598 at 1138 GMT on Wednesday.

In the second half of 2011, Tanzania's current account deficit widened to $2.7 billion from $834.5 million previously, primarily due to the rise in global oil prices, and a surge in imports of oil and machinery, the bank said.

The country's gross official reserves rose to $3.76 billion, or 4.1 months of import cover, from $3.59 billion in June. The bank said it plans to raise the reserves to 4.5 months of import cover during the 2011/12 financial year. 
Sources: Reuters,af.reuters.com, reporting by George Obulutsa; in Dar es Saalaam
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