Country Report

Euler
Hermes
Economic Tanzania
Research

Large current account deficits but strong GDP growth

General Information

GDP USD49.18bn (World ranking 84, World Bank 2014)

Population 50.76mn (World ranking 26, World Bank 2014)
Form of state Republic
Head of government John Pombe Magufuli
Next elections October 2020, presidential and legislative

Strengths
Substantial natural resource base, with offshore
natural gas now supplementing mining (including
gold) and agriculture.
Generally stable politically, with pro-market
government with large parliamentary majority.
Strong IFI and donor support.
Strong inward investment flows.
Strong GDP growth.
External debt relief under the HIPC initiative and
debt forgiveness under G8 auspices.
Weaknesses
Despite years of strong economic growth, Tanzania is
still a low-income country and poverty is pervasive.
Perceptions of corruption remain high.
Secessionist tensions and periodic violence involving the
semi-autonomous islands of Zanzibar.
Fiscal (before grants) and current account deficits.
Dependence on external funding.
Despite HIPC and G8 initiatives and (generally) improved
external debt ratios, servicing of foreign obligations uses
up valuable FX earnings, limiting the pace of
development.
Weak structural business environment.

Country Rating Trade Structure

Economic By destination/origin (% of total)
risk
Exports Rank Imports
India 21% 1 25% China
China 10% 2 24% India
Business
environment
Financing Congo 6% 3 5% United Arab Emirates
risk
risk Kenya 5% 4 4% Kenya
Japan 5% 5 4% South Africa

By product (% of total)
Exports Rank Imports
Political Commercial Gold, non-monetary (excluding gold 16% 1 27% Petroleum, petroleum products and
risk risk
Metalliferous ores and metal scrap 12% 2 7% Road vehicles
Vegetables and fruits 11% 3 4% Other industrial machinery and parts
Tobacco and tobacco manufactures 8% 4 4% Electrical machinery, apparatus and
Oil seeds and oleaginous fruits 6% 5 4% Iron and steel

Source: Euler Hermes Source: UNCTAD

 Economic Overview
Strong growth & positive outlook Key Economic Forecasts
GDP growth has been relatively strong for several
2014 2015 2016f 2017f
years; over a ten-year period to end-2015 GDP
growth was an annual average +6.7%. In every year GDP growth (% change) 7.0 6.8 6.5 6.0
except one since 2000 growth was higher than the Inflation (%, end-year) 4.8 6.8 6.0 5.0

average for Sub-Saharan Africa (see chart). The Fiscal balance (% of GDP) -4.2 -4.5 -4.0 -3.5
outlook remains good both in the short-term and Public debt (% of GDP) 23.9 22.0 20.0 18.5
over a five-year period, given the continuation of
Current account (% of GDP) -10.1 -8.0 -7.5 -7.5
current policies and development of the offshore and External debt (% of GDP) 29.0 32.5 35.0 36.5
onshore natural gas industry. The mining sector
(including gold) appears to be losing cost Sources: National Sources, IHS, Euler Hermes
competitiveness but this is occurring as the energy
sector moves into potential rapid growth. Natural gas
reserves are currently estimated at 57tn cubic feet GDP Growth (%)
but could be considerably higher and exports of
natural gas should be forthcoming within the next
decade. In the meantime, and with some investment
in gas liquefaction and associated infrastructure 8%
already taking place, EH forecasts GDP growth of
+6.5% in 2016 and +6% in 2017.
6%
International agencies provide support to
cover large external imbalances
The countrys external accounts provide a challenge 4%
for economic management. Current account deficits
averaged an annual -8.2% of GDP in the period
2000-2015. The marked increase in the current Tanzania
2%
account deficit in 2011 (-13.1% of GDP) reflected
the high costs of imported energy supplies (oil and Africa

petroleum-related products account for around 27%

of the import bill) and inputs related to state- 0%
sponsored infrastructure investments. Demand for 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
imports of capital goods, particularly related to the
gas sector, are likely to keep import levels high and
the current account deficit at elevated levels (see
chart). The wider donor and investment community Sources: National sources, IHS, Euler Hermes
remains supportive.

FX accumulation is limited and external Current Account Balance and External Debt (% of GDP)
debt is now increasing again, but
repayment obligations are comfortable 60 External debt (% GDP, left scale) 0

Current account (% GDP, right scale)

Against the background of large current account -2
50
deficits, which would not be sustainable without
correspondingly large inflows of donor support, -4
accumulation of FX reserves remains limited and EH 40
expects import cover will remain around four months -6
in 2016 and 2017. 30
-8
External debt levels and associated ratios improved
following debt relief programmes under the auspices 20
of HIPC and G8 initiatives, but remain a burden to -10

the countrys development needs. EH forecasts

10
external debt/GDP and debt/export earnings in 2016 -12

at almost 35% and 185%, respectively. However, a

high degree of concessional lending results in an
annual servicing ratio (debt repayments/export
earnings) of below 3%.
0 -14
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Sources: National sources, IHS, Euler Hermes

DISCLAIMER
These assessments are, as always, subject to the disclaimer provided below.

This material is published by Euler Hermes SA, a Company of Allianz, for information purposes only and should not be regarded as providing any specific advice.
Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be
reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed
to be reliable, it has not been independently verified by Euler Hermes and Euler Hermes makes no representation or warranty (express or implied) of any kind, as
regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use
made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the Euler Hermes Economics
Department, as of this date and are subject to change without notice. Euler Hermes SA is authorised and regulated by the Financial Markets Authority of France.

Copyright 2016 Euler Hermes. All rights reserved.

View all Euler Hermes Economic Contact Euler Hermes Last review: 2016-06-22
Research online Economic Research Team Country Risk Analyst:
http://www.eulerhermes.com Andrew Atkinson
research@eulerhermes.com andrew.atkinson@eulerhermes.com