Standard Chartered’s economists predict positive economic outlook for Tanzania

Dar es Salaam. Standard Chartered Bank economists have forecasted a positive growth for Tanzania in 2020 which is expected to range from 6.5 per cent upwards, a trend that is also mirrored in most of the Sub Saharan African countries.

Speaking in a teleconference Razia Khan, the bank’s chief economist Africa and Middle East said the still-solid growth performance in East Africa should mean that the subregion remains one of the continent’s outperformers.

According to Ms Khan, following the easing of monetary policy in 2018-19, private-sector credit extension is starting to accelerate, having previously been in negative territory three years ago (2017).

“In 2019, the trade deficit increased on higher capital goods and oil imports. This was despite higher gold exports, which increased 26 per cent in the year to September 2019 due to higher prices; and the recommencement of cashew exports,” she said.

Commenting on Tanzania’s prospects, Sarah Baynton-Glen, said although growth has slowed, the outlook for 2020 remains relatively robust.

“The government’s blueprint to improve the business environment, accommodative monetary policy, and public infrastructure investment should support growth. Agriculture should be a key growth driver in 2020, and the government is targeting $ 2billion of annual horticulture exports by 2025 ($ 821million in 2018),” said Miss Baynton-Glen.

She futher added: Resolution of issues arising from state intervention in agriculture and mining should also provide a more positive backdrop to growth in 2020 and support Tanzania’s foreign exchange market, with greater cashew exports and the expected resumption of gold and copper concentrates exports.

Speaking of Kenya, Ms Razia Khan said the key test in the years ahead will be the strength of its fiscal consolidation intent.

She however said it was encouraging that authorities have unveiled plans for further cuts to discretionary spending.

“Revenue administration measures are already bearing fruit, with an improved record on tax collection in the recent past. While rising public debt has been a key concern – especially with the October 2019 raising of the debt ceiling to KSh9 trillion, from an earlier cap of 50 per cent of GDP – a sustained and meaningful fiscal consolidation should boost confidence,” she said.

The bank’s economists expect Kenya’s economy to accelerate by 5.8 per cent in 2020, with private-sector credit growth receiving a boost from the loan rate cap removal, and recent central bank easing.

“A stepped-up effort to deal with delays in government payments will also help, as will the continued focus on growth-supportive ‘Big Four initiatives’. Although the recent locust invasion is a source of potential pressure on agriculture, creating a firm base for sustained medium-term growth will matter much more,” said Ms Khan.

On the other hand Uganda delay to first oil export is likely to weaken near-term growth prospects.

We have lowered our 2020 and 2021 growth forecasts to 6.0 per cent and 6.2 per cent (6.2 per cent and 6.5 per cent prior). We now expect the Bank of Uganda to keep its policy rate on hold at 9.0% throughout 2020, having previously seen scope for more easing. Given elections in 2021, and rising caution over the extent of the government’s public financing requirement, we see the Bank of Uganda adopting a tighter policy stance, with 200bps of rate hikes in 2021. 

Razia Khan further added: 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 0.5ppt of GDP in revenue each year.Achieving sustained progress in revenue mobilisation, especially with elections approaching, has traditionally been a challenge.