Dar es Salaam: The international Monetary Fund (IMF) mission tasked to produce a revised economic forecast for Tanzania will present its findings next week. Speaking to reporters in Dar es Salaam on Tuesday before he made his presentation to the CEO roundtable, IMF Senior Resident Representative in Tanzania John Wakeman-Linn, said the mission was almost completing its work and would reveal new forecast to the media next Wednesday. He declined to go to detail on the forecast, but said a combination of drought, power problems, rising food and fuel prices and inflation are likely to lead to lower economic growth in 2011.
He said however that if the power crisis were to be resolved, the fund’s medium term forecast would most likely remain largely unchanged. Growth prospects for Tanzania in the short and medium term, according to him, are strong, but with significant risks.
The last IMF forecast for Tanzania was done in September last year, in which according to Wakeman-Linn it was based in part on the stronger than expected performance in 2009. In their findings they forecast real GDP growth for 2010, 2011 and 2012 at 7.0 percent, 7.2 percent and 7.5 percent respectively. They also forecast inflation to be 5.5 percent at end of June 2011, which they said is likely to decline to 5 percent thereafter.
The mission cited the key risk factors as weather shocks, fluctuations in commodity prices and a decline in donor assistance.
It therefore sees that in the longer term, the key to maintaining high growth rates will be high quality investment to fill critical infrastructure gaps as well as enhanced integration with the regional and global economies, including increased FDI.
In his presentation titled Economic Prospects for the World, Sub-Saharan Africa and Tanzania, Wakeman-Linn, said raising food and fuel prices will have a clear impact on poverty and inflation, and on the GDP. Interestingly, he said, while food prices in SSA mirrored the global increase in 2008 that has not been the case with the current increases in global food prices.
In much of SSA, food price inflation remains lower than globally, he said, adding that the extent of the impact will depend on how high and fast price rise, on how sustained they are and on policy responses. He suggested that with recovery at hand, fiscal polices need to change. Countries need to review the consistency of their fiscal deficits with available financing and debt sustainability, he suggested.
"There is also a need to review the composition of spending and revenue sources to promote growth and reduce poverty, as well as to develop public financing mechanisms to plan and control government spending, including infrastructure investment," he said.
Globally, he said the economy grew by more than 3 percent in the third quarter of 2,010, down from 5 percent in quarter two, but better than forecast, due to stronger than expected consumption in the US and Japan.
Speaking earlier, the CEO roundtable chairman, Ali Mufuruki, said at the moment the Tanzanian economy is not performing well due to power problems which might retard development in a long run. He urged the government to do away with state monopoly and allow other private firms to generate and distribute power.
Mufuruki said he was optimistic that IMF will help the government in its effort to overcome the challenges before it and hence push forward economy growth.
Founded in 2000 by a handful of CEOs in leading companies in Tanzania, the CEO Roundtable has been working with the government and other economic players to create conditions necessary for emergence of a vibrant and mutually beneficial relationship between the public and private sectors.