Tanzania economy may grow 7%

Tanzania's economy could rebound to 7 percent growth in 2012/13 if the global economy recovers, with gas revenues expected to boost domestic growth in the next decade, a World Bank official said on Friday.

Tanzania's natural gas reserves are now estimated at more than 10 trillion cubic feet following major gas discoveries in the country's deep-water offshore region.

Norwegian oil firm Statoil said on Friday its Tanzanian gas discovery, the biggest oil or gas discovery ever made in the country, has so far proven to hold up to 5 trillion cubic feet of gas, or about 891 million barrels of oil equivalents.

High inflation driven by food and fuel prices dampened growth in east Africa's second biggest economy last year. But the World Bank echoed government forecasts inflation would fall to single digits by June from 19.7 percent in January.

“If the world economy recovers, as is now cautiously expected, we forecast a higher GDP growth rate in 2012/13, reverting to the recent historical trend of 7 percent,” the body's lead economist for Tanzania, Jacques Morisset, told Reuters.

“Tanzania will benefit from natural gas production, but this will not happen before the beginning of next decade.”

Morisset said Tanzania's economic expansion was expected to slow to 6 percent in 2011/12 from 6.5 percent a year ago partly due to a chronic energy crisis, before rebounding in 2012/13.

“The ongoing energy crisis has contributed to the slowdown in economic growth both in the short and longer terms.”

Power output in the country of 42 million people fell 22 percent in the third quarter of last year, Morisset said. This was due partly to low water levels in its key hydroelectric reservoirs.

FALLING INFLATION

The World Bank economist said the slowdown in inflation was dependent on no sudden increases in international food and energy prices, a satisfactory harvest in the next few months, and policymakers maintaining a prudent monetary policy stance.

“It has to be noted that the core inflation rate, excluding food and energy prices, has remained below 10 percent during 2011.”

Analysts, however, expect that the 0.1 percentage point dip in inflation in January was likely only a temporary reprieve, especially with global oil prices under pressure.

Ranked Africa's fourth biggest gold producer, and famed for its game-viewing beneath the snow-capped peak of Mount Kilimanjaro, Tanzania relies on tourism, mining and agriculture. It is, though, attracting increasing investor interest in its telecommunications, energy, and financial services sectors.

Morisset said Tanzania needed to focus on education and job creation, as well as supporting small businesses.

The country should also invest in developing its struggling energy sector, he said, with just 13.5 percent of the population having access to electricity, despite the country having some of the cheapest power tariffs in the region.

“(Lack of access)is the real problem for private sector development and sustainable economic growth. The priority should therefore be on production and distribution,” he said.

Uncertainty surrounding the cost of Tanzania emergency energy plan, demands for higher public sector salaries and external threats such as a global recession pose risks to the country's economy. - Reuters