DAR ES SALAAM: Tanzania's economy is projected to expand by 6.5 to 7 percent in 2012-13, up from about 6.3 percent in 2011, with its deficit cut to 5.5 percent of gross domestic product, the International Monetary Fund said on Tuesday.
The Washington-based IMF also said real Gross Domestic Product (GDP) grew 6.3 percent in the first nine months of 2011 and was expected to have maintained that pace in the final quarter of the year.
The IMF estimate echoes the World Bank's forecast in February that east Africa's second biggest economy could rebound to 7 percent growth in 2012-13, buoyed by the recovery of the global economy.
"For 2012-13, growth is projected in the 6.5-7 percent range. It was agreed that the authorities will pursue further fiscal consolidation to achieve an overall budget deficit of 5.5 percent of GDP in 2012-13," the IMF said in a statement.
The IMF gave no explanation for the greater growth forecast.
Economic analysts say increasing investor interest in Tanzania's telecommunications, energy and financial services sectors should help drive economic growth if the world economy recovers.
The IMF said in February that savings in Tanzania's non-priority programmes were expected to reduce the budget deficit to around 6.5 percent of GDP by the end of June this year, and help tackle inflation.
"Monetary policy will need to be tight over the near term to keep underlying inflation low. Based on a projected improvement in the food situation in the region, headline inflation is projected to return to single digits by end-2012," the IMF said.
The World Bank has a more optimistic forecast on Tanzania's inflation rate, expecting it to fall to single digits by June from 19.7 percent in January, in line with government expectations.
A chronic energy shortage coupled with high inflation driven by food and fuel prices dampened growth in Tanzania last year.
"The increase in electricity tariffs by 40 percent in January 2012 was an important step in covering the associated higher cost of power generation. It will be important to ensure that tariffs continue to reflect the cost of power generation," the IMF said.
The IMF said Tanzania had requested support from the fund's precautionary stand-by credit facility (SCF) as a safety net for a possible global financial slowdown over the coming years, likely to be triggered by the ongoing euro zone crisis.
"The IMF's Executive Board is expected to consider the fourth PSI (policy support instrument) review and the request for the precautionary SCF in June 2012."
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