IMF cuts Tanzanian 2011 growth forecast

last week, saying frequent power outages would hurt output while food and fuel prices could push inflation higher.
The IMF told Reuters last week that it planned to reduce its 7,2 percent forecast for growth in east Africa’s second largest economy and raise its inflation outlook, but did not give figures.
“The IMF mission team projects output growth for 2011 to decline to 6 percent, largely as a result of widespread weather-induced power shortages, but to rebound quickly thereafter,” Martine Guerguil, the head of the IMF’s mission in Tanzania, told a news conference.
Parts of Tanzania, like its northern neighbour Kenya, are suffering from drought. Low rainfall has hurt food production and cut water levels at the country’s main hydropower dams – leading to chronic energy shortages.
“The economy should, however, recover promptly once the government investments in additional (power) generation kick in and weather conditions normalise,” Guerguil said.
“Thus, barring further adverse developments, the mission team projects growth to return to 7 percent by the end of 2011.” Tanzania introduced power rationing late last year.
It was supposed to stop at the end of January, but the government extended nationwide cuts after drought led to a 230 megawatt (MW) deficit on the national grid.
Tanzanian Finance Minister Mustafa Mkulo told the news conference on Friday last week that the government was working to add 260 MW of emergency power generation.
Guergil did not give a new inflation forecast for 2011 at the news conference. The IMF had previously said the inflation rate in Tanzania would rise to 5,5 percent in June and decline to 5 percent thereafter. – AFP.