DAR ES SALAAM, TANZANIA - The Tanzania economy is projected to grow by 5.1 percent this year, though the rebounding will depend on increased capital investments, the new country report by Business Monitor International (BMI) has said.

This is an increase of just 0.6 per cent when compared with the last year's growth, with recent floods, which will cost the nation billions on infrastructure reconstruction and food distribution being a set back to the country's expenditure.

The country's budget might be affected this year due to economic damages caused by floods with analysts saying there is a need for preparing a mini budget.

 

“Our real GDP growth forecast of 5.1 per cent for 2010 is based largely on a 10.0 per cent increase in capital investment during the year, as businesses look to position themselves to take advantage of a larger domestic market,” the BMI report reads in part.

However, this is different from the country's own projections. Bank of Tanzania reports show that the economy is expected to grow by 5.6 per cent this year, with agricultural commodities and gold exports making the economy reach those levels.

This is happening while the country has spent about Tsh1.7 trillion (US$1.5 billion) to mitigate the impact of the global economic crisis, which affected key sectors of the economy including foreign investments, tourism and agriculture.

However, preliminary reports indicate the economy has started to recover in the areas of tourism, mining and agricultural exports, but analysts say this will depend on the recovery among the developed countries.

“The Tanzania economy has not been spared by the global recession: we are expecting the economy to grow by 5.1 per cent in real terms in 2010, which is below the average of 7.7 per cent expansion seen during 2000-2008,” the report said.

“We expect growth to return to something closer to trend in 2011, with a figure of 6.8 per cent. This, in our view, will be driven by capital investment which, in turn, will have its origins in businesses establishing themselves to take advantage of further East African Community (EAC) integration.”

Tanzania as an investment destination has the potential to drive growth over the medium term, but this will be dependent on further political progress on the EAC, says BMI.

From a physical infrastructure point of view, work will need to be done on power generation, which will be crucial to harnessing mineral potential.

Finally, progress will need to be made, despite the political sensitivity, in the area of land ownership structures.

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