Ashift in the pattern of global growth

Transcription

1 Africa & Global Economic Trends Quarterly Statistical Review Statistics Department Third Quarter Volume 1 - October 31, 213 Contents 1 World Economy 1.1. Economic growth & unemployment 1.2. Inflation and financial developments 1.3. Summary of world statistics Economic growth Focus: Tanzanian economy 2.2. Merchandise trade 2.3. Commodity trends 2.. Inflation & money supply 2.. Financial indicators 3 Data sources and descriptions Mthuli Ncube Chief Economist and Vice-President m.ncube@afdb.org At a glance Ashift in the pattern of global growth has started to emerge. Whereas most advanced nations have seen a strengthening of their economic output since the start of the year, emerging economies have witnessed a gradual slowdown. This has prompted the IMF to reevaluate global growth prospects for 213 and 21 downward to 2.9% and 3.6% respectively. For emerging economies, the weaker growth prospects reflect, to varying degrees, infrastructure bottlenecks and other capacity constraints, lower export growth, lower commodity prices, financial stability concerns, and, in some cases, weaker monetary policy support. Except for China, where growth remains robust (forecast at 7.% for 213), slowing momentum in emerging countries has led to currency depreciations. For example, despite an upturn in recent months, the Brazilian real, Indian rupee, and Russian ruble depreciated by 9.7%, 13.6% and.1% respectively between March and September 213. The slowdown felt in emerging economies is likely to depress their consumption demand for commodities, which will dampen the export performance of many developing nations, including in Africa. Meanwhile, the continuation of quantitative easing measures in advanced markets such as the U.S. is likely to intensify capital inflows to some emerging economies, leading to currency fluctuations and possible rises in inflation. Aggregate growth in Africa during the last ten years has been boosted by vigorous domestic demand. This has increased imports in the commercial services category (defined as services minus government services). While exports are dominated by travel and transportation (6.8% and 29.1% respectively of total exports in 212), services imports have been driven by the boom in other commercial services (particularly communication, construction, insurance, and financial services). These commercial services accounted for.3% of total service imports in 212, compared to 38.6% in 2. Charles Leyeka Lufumpa Director, Statistics Department c.lufumpa@afdb.org Steve Kayizzi-Mugerwa Director, Research Department s.kayizzi-mugerwa@afdb.org Emerging economies : Exchange rates (Real Effective Exchange Rates, 1=21) China Russia Brazil India South Africa Africa. Trade of services (billions of current US$) Imports Exports Victor Murinde Director, African Development Institute v.murinde@afdb.org This brief was prepared by Louis Kouakou (Statistician, ESTA1) and Anouar Chaouch (Statistical Assistant, ESTA1) under the supervision of Beejaye Kokil, (Manager, Economic & Social Statistics Division, ESTA.1). For access to development data on African countries, please visit the AfDB Data Portal Web Site at: or the Statistics Department Web Site:

2 2 Statistics Department Third Quarter Volume 1 - October 31, 213 World Economy Economic Growth WORLD ECONOMY : economic growth & unemployment Gradual strengthening of advanced economies Global growth patterns are shifting. In the aftermath of the global financial crisis of 28/9, the strength of emerging economies helped to support the wider economic recovery. However, 213 has witnessed a discernible slowdown in the performance of a number of these economies, although China s performance remains relatively robust. By contrast, advanced countries, including the U.S., Japan, the U.K., and many Eurozone nations, are starting to see a rebound in their economies, partly due to fiscal stimulus measures pursued by their governments, including maintaining low interest rates and quantitative easing measures. In the U.S., the housing market is enjoying a mild recovery while employment figures are also improving, although job growth in September proved more tepid than expected. Although the debt ceiling crisis has been averted in the short term, the U.S. Treasury has forecast that it will exceed its US$16. trillion borrowing authority sometime from mid-february to early March. Greater political rapprochement in Washington is clearly needed to frame a sustainable solution to meet U.S. borrowing needs for the longer term. The second quarter GDP growth in the U.S. has been confirmed at a seasonally adjusted rate of.6%, while the soon-to-be-released third quarter figures are expected to come in at around the same level. However, the fourth quarter 213 will be impacted by the recent budget impasse, which could shave as much as.% off growth. The recent large increase in long-term yields in the United States and many other advanced economies poses risks for emerging market economies, where activity is slowing and asset quality weakening. In the October edition of its World Economic Outlook, the IMF forecast global economic growth in 213 and 21 at 2.9% and 3.6% respectively. U.S. growth for 213 has been revised down to 1.6% from 1.7%, while the 21 forecast remains at 2.6%. The IMF s growth forecast for Eurozone has firmed to -.% from -.% for 213, and to 1.% from.6% for 21. Meanwhile the growth forecast for Japan 213 has been revised up to 2.% from 1.7%. However, the unwinding of fiscal stimulus measures and consumption tax increases scheduled for early next year are expected to weigh on Japan s growth in 21, which is projected at 1.2%. India has been badly affected by capital outflows, with the rupee plunging by 28% over the last two years, while its current account deficit remains at around 3.7%. This lack of momentum, linked to a slowdown in manufacturing and investment, has led the IMF to lower its growth forecast for India to 3.8% for 213 and to.1% for 21. China s growth expectations remain at 7.6% and 7.3% for 213 and 21, respectively. Japan, the world s third largest economy, has continued to expand, backed by the government s ongoing fiscal stimulus measures. This positive development has also been reflected in the most recent business and consumer sentiment indices. Nonetheless, in recent weeks Japan has seen its exports to Asia flatten out, although domestic consumption remains robust. To tackle the very high public debt burden, the government is moving ahead with a planned consumption tax increase in April 21, from its current level of % to 8%. To safeguard the still fragile recovery, a stimulus package of trillion yen (US$.6 bn) is scheduled to come into effect in April 21. Some of this will be targeted at infrastructure development and corporate tax breaks. The Bank of Japan has indicated that it could relax its monetary policy further next year, to guide the economy out of deflation and achieve its 2% inflation target over the next two years Graph 1. Advanced economies / GDP growth (% change on previous quarter) United States Japan United Kingdom Eurozone Graph 2. Emerging economies / GDP growth (% change on same quarter of previous year) China India Brazil Russia Graph 3. Harmonized unemployment rate (% of active population) Eurozone United States

3 Statistics Department Third Quarter Volume 1 - October 31, World Economy Inflation and financial developments WORLD ECONOMY : inflation and financial developments The Eurozone continues to recover from a very low base, after contracting for six straight quarters. It clocked a quarterly growth of.3% in the second quarter of 213, rebounding from a decline of.2% in the previous quarter. This improving picture is being driven by higher household consumption and increased investment in fixed assets. Lead indicators point to a continuation of the momentum in the second half of 213, with improving prospects for 21. The recovery was relatively broad-based in second quarter, with Germany picking up by.7%, and France by.%. Among the southern states which have seen the worst effects of the recession, including mass unemployment Italy s GDP contracted by only.2% and Spain s by.1%, which is an improving picture. There are signs of a weak improvement also in the labor market, although this is still a major cause of concern. In the U.K, GDP growth expanded by.8% the fastest growth for three years, with manufacturing improving by.9% and services by.7%. Soft slowdown in emerging economies Emerging economies, such as Brazil and India, are facing softened growth prospects amid tightened financial conditions and downside risks, including an increase in capital flight, reduced investment inflows, and depreciating currencies. China is the exception in appearing to buck the trend of slowing growth Graph. Inflation / Consumer prices (monthly data, % annual change) China United States Eurozone Japan In India, after months of difficulty, some signs of improvement are beginning to emerge. The annual growth in exports reached 13.% in August, and industrial output was up 2.6%. High inflation and currency depreciation prompted the Reserve Bank of India to increase some key rates. However, growth is expected to remain relatively weak next year. China s economy slowed in the first half of the year, but picked up over the summer. Recent figures for the third quarter reflect accelerated growth at 7.8%, compared to 7.% in the previous quarter. Exports reached a 16-month high in August while industrial production in September 213 rose by 1.2% over the same month in the previous year. The Chinese authorities are trying to restructure the economy so that activity is more geared toward consumption, to ensure a more sustainable growth path. However, latest figures show investment (particularly in property) accounting for over half the GDP expansion in 213, underlining the scale of the challenge Graph. Nominal exchange rates (US$ per national currency) Euro (1) Yen (1) Rupee (1) Yuan (1) ---> Inflation pressure is generally subdued Inflation is currently running below target in advanced economies, at about 1.% on average. The return to target is estimated to be slow, with output recovering only slowly. In emerging and developing economies, inflation is expected to move broadly sideways. The drop in commodity prices and the downshift in growth will reduce price pressures, but capacity constraints and the pass-through from weakening exchange rates are expected to counterbalance this downward pressure. The budget impasse in the United States, which reached a climax in October, put pressure on the greenback compared to several other major currencies. The losses were less steep, however, than in September after the Federal Reserve (Fed) released its surprise decision not to wind down the pace of its securities purchases. In general, investors were reassured by the end of the fiscal impasse and this allowed stock markets to regain their momentum. The temporary resolution to the debt ceiling crisis in October had an impact on 1 month U.S. Treasury bills, whose yield plunged 23 basis points, returning to where it was broadly before the start of the political tensions. Some analysts have questioned though whether U.S. Treasury bills reputation as an investment safe-haven has been damaged Graph 6. Stock market indexes (January 21 = 1) USA (S&P ) Japan (Nikkei 22) Europe (Eurotop) Hong Kong (HSI)

4 Statistics Department Third Quarter Volume 1 - October 31, 213 World Economy WORLD ECONOMY: Summary of world statistics Financial Indicators Table 1: Real GDP Growth (seasonally adjusted data) Country f 212 Q Q Q Q. 213 Q Q.2 i % change on previous year i % change on previous quarter United States Japan Eurozone France Germany Italy i % change on previous year i % change on same quarter of previous year China India Brazil Russia Table 2: Inflation (consumer prices, %) Country Q Q Q Q. 213 Q Q Q.3 i % change on previous year i % change on same quarter of previous year United States Japan China India Eurozone (HCP) France Germany Italy Table 3: Financial indicators Country Q Q Q Q. 213 Q Q Q.3 Stock markets (end of period quotes) USA (S&P ) 1,27.6 1,26.2 1,8. 1, ,.7 1,26.2 1,69.2 1,66.3 1,681. Japan (Nikkei 22) 8,. 1,39.2 1,83.6 9,6.8 8,87.2 1, , , ,.8 U.K. (FTSE 1),72.3,897.8,768.,71.2,72.1 8,87.2 6,11.7 6,21. 6,62.2 Europe (Eurotop) 2,1.9 2,32.9 2,29.3 2,11.3 2,22. 2,32.9 2,31. 2,31.6 2,36.78 Hong Kong (HSI) 18,3. 22,66.9 2,.6 19,1. 2,8. 22, , , ,89.9 Brazil (BVSP) 6,7. 6,92. 6,11.,3. 9,176. 6,92. 6,32. 7,7. 2,338. Exchange rates (national units per US$, period average) Euro Yen Yuan Interest rates (long term rates in % per annum, period average) United States Japan Eurozone

5 Statistics Department Third Quarter Volume 1 - October 31, AFRICA: Economic growth - Recent developments (1/3) Economic Growth GDP growth moderating during 213 for Africa; an improving picture for 21 Africa s resilience in the aftermath of the global financial crisis of 28/9 is well attested; particularly as the region s economic output surpassed that of many advanced countries. Although the Arab Spring of 211 impacted some North African economies, from a pan-african perspective, these negative impacts were partly offset by the robust economic performance of other countries in the region. In such cases, growth has been buoyed by vigorous domestic demand, high commodity prices particularly for minerals, and strong trade linkages with emerging economies. Notwithstanding the impact of the current soft slowdown in emerging economies, Africa s GDP growth rate is forecast at around.8% in 213, picking up to.3% in 21. These levels are still way below the technical rebound of 6.6% growth achieved in 212. During the first nine months of 213, the underlying dynamics of growth varied across African subregions, as well as between countries within the same subregion Graph 7. North Africa - GDP growth (quarterly data, % annual change ) Morocco Egypt North Africa The political and social upheavals that followed the Arab Spring of 211 dominated economic activity in the North African subregion. The political transition process remains far from complete and has been accompanied by increased political and macroeconomic instability. Economic recovery has been interrupted by bursts of domestic unrest. In Egypt and Tunisia, rising social and political tensions weigh heavily on confidence. Both these countries have experienced sharp decelerations in manufacturing output and merchandise exports since 211. Growth started to recover in 212, but lost momentum as a result of recurrences of political and social instability, the difficult external environment, and the contraction in agricultural production due to unfavorable weather conditions in the summer of 212. In Libya, there have been two episodes of extreme macroeconomic volatility since early 211 and oil production has fallen because of security setbacks and infrastructure problems. It is hardly surprising then that the subregion s political volatility has led to economic weaknesses. Inflation, currency depreciations and fuel shortages have constrained business activity and dampened consumer confidence in some countries. Nonetheless, other economies in the subregion continue to enjoy solid growth, such as Algeria and Morocco, where favorable harvests in 213 boosted agricultural output and spurred real GDP growth to.1% in the second quarter Graph 8. GDP growth for selected countries (quarterly data, % annual change ) South Africa Nigeria ---> Southern Africa South Africa, Africa s largest economy, is underperforming according to the IMF, which cites a number of domestic problems constraining growth. These include industrial and public sector disputes and strikes and persistently high unemployment (nearly 2% overall, while the youth jobless total stands at around %). Consequently, the IMF predicts sluggish growth of around 2% for 213, improving to 2.9% in 21. In the second quarter, South Africa s real GDP increased by 3.% annualized rate. Economic activity in the manufacturing industry posted a positive contribution of 1.7% based on growth of 11.%. Meanwhile, the mining and quarrying sector reflected a negative growth of.6%, due to lower production of gold and other products due partly to industrial disputes. 7, 7, 6, 6,,,, Graph 9. Crude oil production for African countries Opec members (1 barrels / day)

6 6 Statistics Department Third Quarter Volume 1 - October 31, 213 Economic Growth AFRICA: Economic growth - Recent developments (2/3) Recent release of the September Purchasing Managers Index for South Africa shows that confidence declined by 7. points to 9.1 in September, which marks its first fall below in six months. One contributory factor has been strikes in the automobile Africa in the industry, World which Economy have hit production. The business sentiment index fell to 6.7 in September from 9.2 in August; meanwhile the new Recent sales release order index of lost September 9. points; Purchasing and the Managers employment Index index fell 1.7 points for South to 9. Africa Africa in in shows September. the World that confidence Economy South declined Africa s by consumer 7. points to 9.1 September, which marks its first fall below in six confidence index fell months. by 8 points One in contributory the three months factor has to September, been strikes sharply in the reversing a 1 point gain automobile in August. industry, This which decline have moved hit production. the index to The its business lowest sentiment index fell to 6.7 in September from 9.2 in August; level in ten years. Recent release of the September Purchasing Managers Index for South Africa shows that confidence declined by 7. points meanwhile the new sales order index lost 9. points; and the employment to 9.1 index in September, fell 1.7 points which marks to 9. its in first September. fall below South in six Africa s months. consumer One confidence contributory index factor fell by has 8 points been strikes in the three in the automobile industry, which have hit production. The business sentiment index fell to 6.7 in September from 9.2 in August; meanwhile the new sales order index lost 9. points; and the employment index fell 1.7 points to 9. in September. South Africa s consumer confidence index fell by 8 points in the three months to September, sharply reversing a 1 point gain in August. This decline moved the index to its lowest level in ten mining years. sector (1.6% growth) resulting from a 19.2% increase in diamond production, followed by services activities (6.2%) In Botswana, real GDP growth accelerated to 7.% in the second quarter of 213, following a 3.3% increase in the first quarter. The substantial growth is attributed firstly to the mining sector (1.6% growth) resulting from a 19.2% increase in diamond production, followed by services activities (6.2%) In Botswana, real GDP growth accelerated to 7.% in the second quarter months to September, sharply reversing a 1 point gain in of 213, following a August. 3.3% increase This decline the moved first quarter. the index The to its substantial lowest level growth in ten years. is attributed firstly to the mining sector (1.6% growth) resulting from a In Botswana, real GDP growth accelerated to 7.% in the 19.2% increase in diamond production, followed by services activities second quarter of 213, following a 3.3% increase in the first (6.2%) and construction quarter. (.2%). The substantial growth is attributed firstly to the East Africa and construction (.2%). Benefiting from the East rise Africa in commodity prices, the East Africa subregion showed a stable and Benefiting solid growth from the momentum, rise in commodity underpinned prices, by the the East robust Africa performances of countries subregion such showed as a Tanzania, stable and Rwanda, solid growth and Uganda. momentum, In underpinned and construction by the robust (.2%). performances of countries such as Kenya, real GDP slowed Tanzania, in the Rwanda, second and quarter Uganda. of In 213 Kenya, to.3%, real GDP from slowed.2% in in the first quarter. Growth the second East Africa was quarter strongest of 213 in the to electricity.3%, from and.2% water in the sector, first quarter. Growth was strongest in the electricity and water which expanded by sector, 12% which compared expanded to by 3.9% 12% in compared the previous to 3.9% quarter, in the boosted by the production previous quarter, of hydro boosted and by geothermal production power. of The hydro next and geothermal power. The next highest-performing sector in highest-performing Kenya sector was in that Kenya of finance, was that which of advanced finance, which by 1.2% advanced (up from by 1.2% (up from 3.9% in the first quarter), followed by by construction, which expanded by 6.7% owing to a rise in the production of cement. expanded by 6.7% In owing contrast, to a hotels rise in and the restaurants production contracted of cement. by In 11.%, contrast, and hotels and restaurants agriculture contracted grew by only 11.%, %, and down agriculture from 8.1% in grew the by previous only quarter. %, down from 8.1% in the previous quarter. Benefiting from the rise in commodity prices, the East Africa subregion showed a stable and solid growth momentum, underpinned by the robust performances of countries such as Tanzania, Rwanda, and Uganda. In Kenya, real GDP slowed in the second quarter of 213 to.3%, from.2% in the first quarter. Growth was strongest in the electricity and water sector, which expanded by 12% compared to 3.9% in the previous quarter, boosted by the production of hydro and geothermal power. The next highest-performing sector in Kenya was that of finance, which advanced by 1.2% (up from West Africa 3.9% in the first quarter), followed by construction, which Growth expanded in West by Africa 6.7% remained owing to robust a rise in across the production 213. In of Ghana, cement. In contrast, hotels and restaurants contracted by 11.%, and agriculture grew by only %, down from 8.1% in the previous West Africa GDP grew by 6.1% per annum in the second quarter of 213, Growth in West Africa down remained from 6.7% robust in the across first 213. quarter In of Ghana, 213. GDP Driving grew this expansion, quarter. the services sector increased by 9.2%, buoyed by by 6.1% per annum in the second quarter of 213, down from 6.7% in the strong West growth Africa in financial and assurance activities (27.%), first quarter of 213. information Driving this and expansion, communication the services (2.%) sector and increased public administration (19.7%). The industrial sector grew at an by 9.2%, buoyed by strong growth in financial and assurance activities annual rate of 2.%, supported by expansion in mining, (27.%), information electricity, and communication and construction. (2.%) However, and public the agricultural administration sector (19.7%). The industrial contracted sector by grew 3.9%, at with an annual negative rate growth of 2.%, in cocoa supported production (-1.%), livestock (12.6%), and forestry and logging (8.6%). by expansion in Compared mining, electricity, to the previous and construction. quarter, real However, GDP seasonally the agricultural sector adjusted contracted rebounded by 3.9%, to 3.9% with in negative the second growth quarter in cocoa after a contraction of 3.1% in the first quarter. production (-1.%), livestock (-12.6%), and forestry and logging (-8.6%). In Nigeria, the economy grew by 6.2% in the second quarter Compared to the previous of 213, quarter, down from real GDP 6.6% seasonally recorded in adjusted the first rebounded quarter and to 3.9% in the second 6.39% quarter of one after year a ago. contraction The average of 3.1% daily in production the first quarter. of crude Growth in West Africa remained robust across 213. In Ghana, GDP grew by 6.1% per annum in the second quarter of 213, down from 6.7% in the first quarter of 213. Driving this expansion, the services sector increased by 9.2%, buoyed by strong growth in financial and assurance activities (27.%), information and communication (2.%) and public administration (19.7%). The industrial sector grew at an annual rate of 2.%, supported by expansion in mining, electricity, and construction. However, the agricultural sector contracted by 3.9%, with negative growth in cocoa production (-1.%), livestock (12.6%), and forestry and logging (8.6%). oil in Compared the second to quarter the previous of 213 was quarter, recorded real at GDP 2.1 seasonally million barrels adjusted per day, rebounded down from to % million in the barrels second per quarter day in after the a In Nigeria, the economy first quarter contraction grew by of 6.2% 213, of 3.1% in and the in the 2. second first million quarter. barrels of per 213, day down in the second from 6.6% recorded in In quarter the Nigeria, of first quarter the 212. economy These and grew figures, 6.% by of 6.2% with one in year their second associated ago. quarter The gas components, of 213, down resulted from in 6.6% a contraction recorded in of the 1.1% first in quarter oil GDP and Graph 12. Manufacturing production average daily production for the of second crude quarter oil in the of second 213 (compared quarter of with % was (monthly data, % annual change) 6.39% of one year ago. The average daily production of crude 2 recorded recorded at 2.1 million oil barrels, in in the the second first quarter down quarter of from 2.3 of and million was -.8% barrels recorded in the in at the 2.1 second first million quarter of 212). The non-oil sector in Nigeria expanded by 1 barrels per day, down from 2.3 million barrels per day in the quarter of 213, and 7.% 2. million in the second barrels quarter in the of second 213, down quarter from of 7.6% 212. one These year 1 first quarter of 213, and 2. million barrels per day in the ago. Despite its substantial oil wealth, Nigeria has recorded figures, with their associated second gas quarter components, of 212. These resulted figures, in a with contraction their associated of federal budget deficits for the past four years. Difficulties in gas components, resulted in a contraction of 1.1% in oil GDP 1.1% in oil GDP for tightening the second fiscal quarter policy are of in 213 part (compared related to with the country s -.% for the second quarter of 213 (compared with -.% recorded in the first complex quarter federal of 213 structure and -.8% and highlight in the second the need quarter to push recorded in the first quarter of 213 and -.8% in the second of - through partially implemented reforms that would strengthen 212). The non-oil the sector fiscal quarter position, in Nigeria of 212). including expanded The non-oil petroleum by sector 7.% subsidies in Nigeria in reduction. the expanded secondby -1 Egypt 7.% in the second quarter of 213, down from 7.6% one year -1 South Africa quarter of 213, down from ago. 7.6% Despite one its substantial year ago. oil Despite wealth, its Nigeria substantial has recorded oil Mauritius wealth, Nigeria has recorded federal federal budget budget deficits for deficits the past for the four past years. four Difficulties years. in -2 Tunisia tightening fiscal policy are in part related to the country s -2 Difficulties in tightening Chief Economist fiscal policy Complex, are in ECON part related to the country s 6 complex federal structure and highlight the need to push complex federal structure through and highlight partially implemented the need to reforms push that through would partially strengthen implemented reforms that the would fiscal position, strengthen including the petroleum fiscal position, subsidies reduction. including petroleum subsidies reduction Graph 1. East Africa - GDP growth (quarterly data, % annual change) Graph 1. Graph 1. Kenya Rwanda Uganda Graph 11. GDP growth for selected countries (quarterly data, % annual change ) Graph 11. Botswana Namibia Mauritius Chief Economist Complex, ECON 6

7 Statistics Department Third Quarter Volume 1 - October 31, Economic Growth AFRICA: Economic growth - Recent developments (3/3) Industrial output As with GDP growth, manufacturing output has shown a differentiated picture across African countries during recent months. In Tunisia, after a strong rebound at the turn of , manufacturing decelerated since March 213 to just below 2% annual growth in August. Egypt, which has suffered from a continuation of social and political unrest since 212, saw its industrial output move into positive territory in April 213 the first time in 11 months. In other countries too, industrial production is starting to strengthen (Mauritius, Côte d Ivoire, Senegal). Soft political stabilization and economic recovery continue in Côte d Ivoire, with industrial output showing a 1% annual growth trend in the second quarter 213. In South Africa, manufacturing output posted a 2.1% momentum in August, exceeding expectations, as the rand s decline boosted export revenues Graph 13. West Africa : industrial production (quarterly data, % annual change) Côte d'ivoire Senegal Niger Downside risks for the continent Despite the dynamism of many African economies, persistently high unemployment rates and income inequalities continue to raise critical issues related to sustained and inclusive growth. The basic question remains: how to ensure equality of access to the opportunities created by economic growth, especially for the poorest segments of society. The high level of youth unemployment in particular has become a major factor constraining the continent s economic and social development. This needs to be addressed in order to reap the demographic dividend of a fast-growing youthful population. One of the root causes of the social unrest that arose in North Africa was the high level of unemployment among a youthful population who also felt alienated from the political process. Lessons clearly need to be learned to build a more inclusive society Graph 1. Unemployment rates (quarterly data, % of active population) Egypt Mauritius South Africa ---> Both domestic and external factors present downside risks for the continent s economic prospects. In North Africa, as we have seen, setbacks in achieving political and social stability are damaging business and investor confidence. The main threats to the Sub-Saharan outlook are a global economic downturn and/or a further deceleration of growth in major emerging markets, which that could weaken exports through lower commodity prices or reduced inflows of FDI Table : Real GDP growth (%) Botswana Egypt Ghana Kenya Mauritius Morocco Namibia Nigeria Rwanda Senegal Country South Africa Tanzania Tunisia Uganda Q Q Q Q. 213 Q Q.2 i % change on previous year i % change on same quarter of previous year

8 8 Statistics Department Third Quarter Volume 1 - October 31, 213 Focus (1/3) Tanzanian economy The Tanzanian economy has shown robust performance over the last ten years, with an average annual growth of around 7.%. Despite a challenging global environment, growth prospects remain steady for 213 and 21, thanks to Tanzania s diversified economic structure, the decisive contribution of services activities to GDP growth and favorable international mineral prices, which Africa support in export the World earnings. Economy Monetary policy has been tightened to bring inflation down to a moderate 6.1% in September 213, from a high level of nearly 2% in late 211. The external current account deficit, though large currently (around US$ 33.6 million), is projected to moderate significantly in the longer term. With ongoing structural reforms, Tanzania has gained access to international markets, but rising reliance on non-concessional funding, together average annual growth of around 7.%. Despite a challenging global environment, growth with a persistent fiscal deficit, raises concerns. In the long term, the development of the gas sector, if properly managed, prospects remain steady for 213 and 21, thanks to Tanzania s diversified economic should have a favorable impact on the balance of payments. FDI still finances most of the deficit and these inflows should continue to rise with gas-related projects through 22. Decisive contribution of services to growth After a temporary slowdown in 29, the Tanzanian economy has recovered since 21, with an annual Decisive growth contribution rate of of around services 7%. to With growthits diversified economic structure, growth After a is being temporary driven slowdown by buoyant in 29, commodity the Tanzanian exports and increased construction economy and has service recovered activities. since 21, The with contribution an annual growth of the rate of around 7%. With its diversified economic structure, services sector remains growth decisive, being accounting driven by buoyant for roughly commodity half of exports economic and growth. This is largely increased due construction to the dynamism and service of the activities. sectors The of contribution of the services sectors remains decisive, telecommunications, wholesale and retail trade, and real estate. The macroeconomic outlook telecommunications, remains favorable wholesale for and Tanzania. retail trade, The economy and real estate. is projected to grow at an annual pace of about 7% in both 213 and 21, The macroeconomic outlook remains favorable for Tanzania. supported by ongoing investments in infrastructure and the projected The economy is projected to grow at an annual pace of favorable weather conditions. about 7% In in addition, both 213 regional and 21, integration supported initiatives by ongoing offer prospects for increased investments exports in of infrastructure manufactured and goods the projected and enhanced favorable weather conditions. In addition, regional integration transport services in initiatives the sub-region offer prospects that should for also increased make exports a positive of contribution. Moreover manufactured the newly found goods and natural enhanced gas resources transport services could in be the a sub-region that should also make a positive contribution. key driver of growth in the medium term. In the first quarter of In 213, the first real quarter GDP accelerated of 213, real GDP at a accelerated 7.% annual at a 7.% rate, compared to 6.3% in the annual previous rate, compared quarter. With to 6.3% the in bumper the previous harvest quarter. of major With the bumper harvest of major food crops, value added in food crops, value added in agriculture, which accounts for around 27% of agriculture, which accounts for around 27% of GDP, GDP, registered a modest registered growth a modest rate of growth 1.%. rate During of 1.%. the During same the quarter, same manufacturing activity quarter, grew by manufacturing 8.6%, although activity the grew mining by 8.6%, and although quarrying the mining and quarrying sector recorded a decline of.7%. The sector recorded a decline mining of sector.7%. was The impacted mining by sector lower international was impacted prices by for lower international prices gold for and gold diamonds, and diamonds, in addition in to addition the negative to the effect negative of the expiration of one mining company s license. The largest effect of the expiration of one mining company s license. The largest positive positive contributions to growth were posted in services contributions to growth activities, were posted which in grew services by 1.3% activities, and which contributed grew 6.1 by 1.3% and contributed percentage 6.1 percentage points to points total GDP to total growth, GDP and growth, in electricity and in generation and construction (6.3% and.3% growth rates). electricity generation and Data construction for the second(6.3% quarter and suggest.3% that growth growth rates). momentum Data for the second quarter may suggest have firmed that growth in mining momentum and manufacturing may have activities. firmed in mining and manufacturing Widening activities. trade deficit Widening trade deficit structure, the decisive contribution of services activities to GDP growth and favorable international mineral prices, which support export earnings. Monetary policy has been tightened to bring inflation down to a moderate 6.1% in September 213, from a high level of nearly 2 % in late 211. The external current account deficit, though large currently (around US $ 33.6 million), is projected to moderate significantly in the longer term. With ongoing structural reforms, Tanzania has gained access to international markets, but rising reliance on non-concessional funding, together with a persistent fiscal deficit, raises concerns. In the long term, the development of the gas sector, if properly managed, should have a favorable impact on the balance of payments. FDI still finances most of the deficit and these inflows should continue to rise with gas -related projects through 22. accounting for roughly half of economic growth. This is largely due to the dynamism of the sectors of Moreover the newly found natural gas resources could be a key driver of growth in the medium term. Since the end of 21, Tanzania s foreign trade has been characterized by a divergent pattern in terms of merchandise exports and import flows. While exports saw a notable deceleration both in current Tanzanian shilling (TZS) Since the end of 21, Tanzania s and current foreign US$, trade the has import been characterized of goods has by accelerated a divergent sharply. This led to a rising trade deficit of almost TZS pattern in terms of merchandise 3, billion exports in the and first import half of flows Meanwhile, While exports during saw the a notable deceleration both year in current ending July Tanzanian 213, shilling the value (TZS) of and imports current of goods US$, and the services in current US$ decreased compared the import of goods has accelerated sharply. This led to a rising trade deficit of almost corresponding period of 212. Much of the decrease was TZS 3, billion in the observed first half in of imports 213. of Meanwhile, machinery, during industrial the raw year materials, ending and consumer goods. Oil imports increased during the period July 213, the value of imports of goods and services in current US$ under review. decreased compared the corresponding period of 212. Much of the decrease was observed in imports of machinery, industrial raw materials, and consumer goods. Oil imports increased during the period under review Tanzania : GDP growth and sectoral contributions (quarterly data, % of annual change) GDP growth Services Agriculture Manufacturing Chief Economist Complex, ECON Tanzania : Main exports (quarterly data, in billions of TZS) Minerals Manufactured products ---->

9 Statistics Department Third Quarter Volume 1 - October 31, Focus (2/3) Tanzanian economy (continued) The slowing pace of exports Africa can be in partly the World explained Economy by weakening external demand, particularly from emerging economies (in particular China, India and South Africa) which, on aggregate, are starting to register a soft The slowing pace of exports can be partly explained by slowdown in growth. Minerals have benefited from high international prices weakening external demand, particularly from emerging in the past few years although economies gold (in prices particular have recently China, India started and to also recede. South The slowing pace of exports can be partly explained by Africa) which, on aggregate, are starting to register a soft Nonetheless, minerals remain weakening the principal external export, demand, with particularly a stable from average emerging slowdown in growth. Minerals have benefited from high share of 3.7% of total exports international economies over prices (in particular the in the past China, few India period. years and The although also South share gold of prices Africa) have which, recently on aggregate, started are to starting recede. to register Nonetheless, a soft manufactured products increased minerals slowdown remain from in growth. the 9% principal in Minerals 2 export, to have nearly with benefited a 26% stable in from average 212. high By comparison, agricultural share international raw of 3.7% prices products of total in the and exports past few other over years goods the although posted gold on period. prices The have share recently of manufactured started to products recede. increased Nonetheless, from average a 17.8% share over 9% minerals the 2 same remain to period. nearly the principal 26% export, in 212. with By a stable comparison, average Service receipts in current US$ 9% increased 2 to by nearly 13.9% 26% during 212. the By year comparison, ending Service agricultural receipts raw in current products US$ and increased other by goods 13.9% posted during on July 213, compared with the the year corresponding ending July period 213, in 212. compared The with increase the average a 17.8% share over the same period. corresponding period in 212. The increase was mainly was mainly driven by travel and transportation revenues, which accounted driven Service by receipts travel inand current transportation US$ increased revenues, by 13.9% which during for over 8% of total service accounted the receipts. year for over ending Travel 8% July receipts of total 213, increased service compared receipts. by with 1.% Travel the receipts corresponding increased period by 1.% in 212. following The increase an increase was mainly in following an increase in tourist tourist driven arrivals. by arrivals. travel In parallel, In and parallel, transportation service payments service revenues, increased payments which by increased by 2.1%, while 2.1%, the accounted income while the for account income over 8% account deficit of total deficit service widened receipts. by by 1.%. Travel Consequently, during the year ending July 213, the overall balance of %, million while the compared income account to US$ deficit widened million by 1.%. in the payments recorded a surplus corresponding Consequently, of US$ period during million of 212. the compared year As a ending result, to July gross US$ 213, official the reserves million in the corresponding overall amounted period balance of of to 212. payments US$,33. As a recorded million, result, a gross surplus to cover official.3 US$ months of million projected compared imports to US$ of goods and million services, in the reserves amounted to US$ excluding,33. corresponding those million, period financed to cover of by foreign As months a direct result, of investment. gross projected official Meanwhile, imports of goods and services, reserves gross excluding amounted foreign those to US$ assets financed,33. of banks million, stood by foreign to cover at US$ direct months million. of Official projected current imports transfers of goods declined and by services,.7% investment. Meanwhile, gross from the foreign levels assets recorded of in banks the year stood ending at US$ July , excluding those financed by foreign direct investment. following a reduction in external disbursements. This led to million. Official current transfers Meanwhile, a widening declined gross of the by foreign current.7% assets account from of deficit the banks levels stood by.3% recorded at US$ to US$ 89.6 million. Official current transfers declined by.7% in the year ending July , billion, compared following to US$ a reduction.6 billion in in the external previous from the levels recorded in the year ending July 212, year. disbursements. This led to a following widening a reduction of the current in external account disbursements. deficit by This.3% led to For a 213, widening the of current the current account account deficit deficit is expected by.3% to to reach US$ to US$.23 billion, compared to US$.6 billion in the previous year. For 213, the current account This For deficit will 213, happen is expected the once current the to account gas reach pipeline deficit 1% has of is expected GDP. been However, completed to reach the deficit is projected to decline 21. 1% significantly of International GDP. However, after reserves domestic the deficit are targeted natural is projected gas to strengthen replaces to decline gradually. significantly Tanzania s after domestic risk of debt natural distress gas replaces remains expensive low, but expensive liquid fuel as the the main liquid debt source fuel ratio as to the of GDP thermal main has source risen power of steadily thermal generation. over power the generation. This past few will happen once the gas pipeline years This to will has reach happen been 2.% once the completed in 213. gas pipeline in Fiscal has 21. policy been International aims completed a stabilization in 21. International of the debt reserves ratio to are about targeted % to of strengthen GDP in reserves are targeted to strengthen 21. gradually. gradually. Tanzania s Tanzania s risk of debt distress risk of remains debt distress low, but the debt ratio to GDP has risen steadily over the past few remains low, but the debt ratio Inflation to GDP pressures has risen easing steadily over the past few years years to reach 2.% in 213. Fiscal policy aims at a to reach 2.% in 213. Fiscal In stabilization mid-212, policy aims Tanzania of the at a debt stabilization decided ratio to about tighten of the % debt its monetary of ratio GDP toin policy 21. in order to reduce a persistently high inflation rate about % of GDP in 21. Inflation pressures easing agricultural share of raw 3.7% products of total and exports other over goods the posted on average period. a 17.8% The share share of manufactured over the same products period. increased from Consequently, receipts increased during by the 1.% year ending following July an 213, increase the in overall tourist balance arrivals. of In payments parallel, service recorded payments a surplus increased of US$ by 1%.23 of billion, GDP. However, compared the to US$ deficit.6 is billion projected in the to previous decline significantly year. after domestic natural gas replaces expensive liquid fuel as the main source of thermal power generation. (21 months of double digits) down to single digits. The Inflation pressures easing authorities complemented measures already taken in late 212 In by mid-212, reducing Tanzania their ceiling decided for average to tighten reserve its monetary money growth policy from in order 1.7% to reduce to 1.2%. a persistently Fiscal consolidation high inflation and rate tight (21 monetary months of policy double were digits) major down contributors to single digits. to the The slowdown authorities in complemented inflation, assisted measures by already favorable taken weather in late In mid-212, Tanzania decided conditions 212 by to in reducing tighten the East their its African monetary ceiling region, for average policy which reserve boosted in order money food to 1 production. Specifically, headline inflation in Tanzania Services (net) reduce a persistently high inflation growth from rate 1.7% (21 months to 1.2%. of double Fiscal consolidation digits) down and 9 halved, reaching 6.1% in September 213 from a high 3 Income (net) tight monetary policy were major contributors to the Transfers (net) ---> 8 to single digits. The authorities level slowdown of complemented nearly in 2% inflation, in late measures assisted 211, by while already favorable food taken inflation weather in dropped to 6.9% from more than 26% in January late 212 by reducing their ceiling conditions for in average the East African reserve region, money which growth boostedfrom food 6 production. Specifically, headline inflation in Tanzania 1 1.7% to 1.2%. Fiscal consolidation halved, reaching and tight 6.1% monetary in September policy 213 were from major a high contributors to the slowdown level in of inflation, nearly 2% assisted in late by 211, favorable while food weather inflation 3 dropped to 6.9% from more than 26% in January 212. conditions in the East African region, which boosted food production Specifically, headline inflation in Tanzania halved, reaching 6.1% in September 213 from a high level of nearly 2% in late 211, while food inflation dropped to 6.9% from more than 26% in January 212. Chief Economist Complex, ECON Tanzania : Foreign trade of goods (quarterly data, in billions of TZS) Exports Imports Trade balance 28 Tanzania : Exports by commodity (average share in total exports, in %) Agricultural raw products Minerals Manufactured products Other products Tanzania : Balance of payments key components (quarterly data, in billions of TZS) Chief Economist Complex, ECON 9