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Source: Standard Chartered Research - CEO Roundtable of ...
Source: Standard Chartered Research   1
Source: Standard Chartered Research - CEO Roundtable of ...
Global and SSA outlook
                     Razia Khan, Chief Economist – Africa & the Middle East
                                                                                                    February 2019

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Source: Standard Chartered Research - CEO Roundtable of ...
Key themes in 2019 – Fighting the current

§ The tide is going out for the global economy
   § We expect 3.6% global GDP growth in 2019, down from 3.8% in 2018
   § Prior growth-supportive factors are now reversing:
        § End of QE era => Higher funding costs
        § End of US fiscal sugar rush
        § Demographic dividends turning into drags for many major economies (to worsen in the 2020s)
§ China less willing to use the credit engine to support growth this time
§ Globalisation facing bouts of protectionism – US-China trade war

                                                                              Source: Standard Chartered Research   3
US – Tight labour market, positive output gap justify hawkish Fed

US output gap is in positive territory                                       Initial jobless claims indicate tight labour market
Output gap, % of potential GDP                                               4-wk average, IJC as % of US workforce, age 15-64
 %
                                                                              0.35%
 6

                                                     Current
 4
              Japan                                                           0.30%

 2

                                                                              0.25%
 0

-2                                                                            0.20%
                EU

-4

                                          US                                  0.15%

-6

-8                                                                            0.10%
     Jan-93           Jan-99   Jan-05       Jan-11         Jan-17   Jan-23        Sep-83        Sep-90       Sep-97       Sep-04   Sep-11   Sep-18
Source: IMF, OECD, Standard Chartered Research                               Source: Bloomberg, Standard Chartered Research

                                                                                                                                                 4
US – Focused on the tight labour market, positive output gap

US FOMC hiking cycles usually end with policy rate above ‘neutral’
%, shaded area represents restrictive policy; i.e., where real FFTR is above r*
  10                 r*                real FFTR              nominal FFTR                        U-3, inverted, RHS                              0
                                                                                                                                         F/C

   8
                                                                                        Periods where real FFTR                                   2
                                                                                             higher than r*
   6
                                                                                                                                                  4

   4
                                                                                                                                                  6
   2

                                                                                                                                                  8
   0

                                                                                                                                                  10
  -2

  -4                                                                                                                                            12
   Dec-92   Mar-95        Jun-97   Sep-99   Dec-01   Mar-04    Jun-06       Sep-08       Dec-10      Mar-13       Jun-15       Sep-17      Dec-19

                                                              Source: Bloomberg, Federal Reserve Bank of San Francisco, Standard Chartered Research    5
The reversal of QE means higher funding costs

Major central banks’ balance sheets are likely to contract further in 2019
Change in central bank balance-sheet size, USD tn, y/y (LHS); SPX index, % y/y (RHS)
2,400                                                                                                                    Forecast              60
                SPX (% y/y - RHS)                                    Change in total
2,200
                                                               (Fed + ECB + BoJ) balance
2,000                                                             sheet size (USD bn)
                                                                                                                                               40
1,800
1,600
1,400
                                                                                                                                               20
1,200
1,000
 800                                                                                                                                           0
 600
 400
                                                                                                                                               -20
 200            USD 2.4tn             USD 1.9tn                USD 1.3tn                     USD 4.8tn
   0
 -200
                                                                                                                                               -40
 -400
 -600
 -800                                                                                                                                          -60
    Jun-08   Jun-09   Jun-10        Jun-11   Jun-12   Jun-13      Jun-14    Jun-15      Jun-16       Jun-17       Jun-18        Jun-19

                                                                               Source: Fed, BoJ, ECB, Bloomberg, Standard Chartered Research       6
Widening US deficits to damage the USD medium-term

When do fiscal deficits matter for the USD?
USD narrow TWI (LHS) vs US fiscal + C/A deficits, % of GDP (RHS)
150                                                                                                                                 2

140
                                                                                                                                    0
                                                        US twin deficits (RHS)
130
                                                                                                                                    -2
120
                                                                                                                                    -4
110

100                                                                                                                                 -6

 90
                                                                                                                                    -8
 80
                                                  USD TWI (LHS)
                                                                                                                                    -10
 70
                                                                                                                                    -12
 60

 50                                                                                                                                 -14
  Jun-73   Jun-77   Jun-81   Jun-85   Jun-89   Jun-93   Jun-97      Jun-01       Jun-05      Jun-09       Jun-13        Jun-17

                                                                                   Source: Bloomberg, Standard Chartered Research        7
China has reduced the credit intensity of GDP growth

Will China deliver another round of stimulus as growth slows?
China economic activity tracker, % (LHS); credit intensity – change in credit/change in nominal GDP, % (RHS)

 16              China economic activity                                                                                                 600
                         tracker                    Instances where credit intensity was ramped
                                                               up as growth slowed
 14
                                                                                                                                         500

 12

                                                                                                                                         400
 10

  8                                                                                                                                      300

  6
                                                                                                                                         200

  4

           Credit intensity (RHS)                                                                                                        100
  2

  0                                                                                                                                 0
  Mar-05          Sep-06        Mar-08     Sep-09   Mar-11        Sep-12       Mar-14         Sep-15          Mar-17           Sep-18

                                                                                        Source: Bloomberg, Standard Chartered Research     8
Distribution of world GDP growth

China will become the second-largest economy in 2019, overtaking the euro area when measured by
nominal GDP at market exchange rates
Size represents 2019F percentage share of level of world GDP at market exchange rates; shade represents
whether share is increasing/decreasing vs past-5-year average

 Decreasing                   Increasing
                                                                            Source: IMF, Standard Chartered Research   9
Distribution of world GDP growth (cont’d)

We expect global growth to moderate in 2019 versus 2018; euro area, MENA and the UK will expand at
a slower pace versus past-five-year levels
Size represents 2019F ppt contribution to world GDP growth at market exchange rates; shade represents rate
of contribution vs past-5-year average; percentages represent estimated share of world GDP growth in 2018

  Fast   Neutral   Slow

                                                                             Source: IMF, Standard Chartered Research   10
Africa’s economic outlook
Africa – Recovery time?

Africa macroeconomic forecasts
GDP growth, % y/y
8

7

6

5

                                                                                                  World
4

3

                                                                                                   SSA
2

1

0

-1
     2000    2002     2004       2006   2008   2010   2012      2014              2016             2018

                                                             Source: IMF, Standard Chartered Research   12
SSA GDP – Weakness was largely due to South Africa and Nigeria

SSA’s two largest economies saw modest growth improvements in 2017
GDP growth, % y/y
7

6

5

4

3

2                                                                 South
                                                                  Africa
1

0

-1

-2                                                                     Nigeria

-3
     Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18

                                                                             Source: NBS, STATS SA, Standard Chartered Research   13
Standard Chartered Africa Business Insight surveys

Nigeria’s businesses are the most optimistic, Tanzania’s the least
Standard Chartered Africa Business Insight surveys (50=neutral)
100

 90                                                                                  Industry business conditions
                                                                                           (past 12months)
 80
                                                                                                        Business activity levels
 70
                                                                                                           (next 12months)
 60
                                                                                                                        Breakeven=50
 50

 40

 30

 20

 10

  0
         Nigeria        Kenya          Uganda         Ghana          Zambia       Cote d'Ivoire        Botswana            Tanzania

§ Standard Chartered – Africa Business Insight (SC-ABI) surveys, compiled by IHS Markit, cover eight Sub-Saharan African
  (SSA) economies: Botswana, Côte d’Ivoire, Kenya, Ghana, Nigeria, Tanzania, Uganda and Zambia.
§ The surveys are designed to give a unique perspective on the current and future business conditions, measuring
  companies’ intentions for a range of business variables in the coming year.
§ The indicators offer an insight into what firms expect will be major positive and negative factors for their businesses in the
  coming 12 months, as well as how conditions have changed in the past year.

                                                                                          Source: IHS Markit, Standard Chartered Research   14
SSA – Growth still supported by global outlook

            Emerging markets capture a larger share of                                                Africa-China trade is growing again
            Africa’s trade (Africa’s trade by region, USD bn)                                         USD bn and % y/y
            45                                                                                        185                                              Trade, USD bn                                     80
Thousands

                                                                                          Thousands
                                                                                                                                                           (LHS)
                                                                  Asia
            40                                                                                                        % y/y (RHS)
                                                               excl.China                                                                                                                                60
                                                                                                      135
            35
                                                                                                                                                                                                         40
            30
                                                                                                       85
                                                                                                                                                                                                         20
            25

                                                                                China                                                                                                                    0
            20
                                                                                                       35

            15
                                                                                                                                                                                                         -20
                                                       Euro area
            10                                                                                        -15
                                                                                                                                                                                                         -40
             5                                                              Middle East
                              US                                                                      -65                                                                                                -60
             0
                                                                                                             2006

                                                                                                                    2007

                                                                                                                           2008

                                                                                                                                  2009

                                                                                                                                         2010

                                                                                                                                                2011

                                                                                                                                                       2012

                                                                                                                                                              2013

                                                                                                                                                                     2014

                                                                                                                                                                            2015

                                                                                                                                                                                   2016

                                                                                                                                                                                          2017

                                                                                                                                                                                                 H1-18
             Nov-08 Jan-10 Mar-11 May-12 Jul-13 Sep-14 Nov-15 Jan-17 Mar-18
            Source: IMF, Standard Chartered Research                                                  Source: National sources, Standard Chartered Research

                                                                                                                                                                                                         15
SSA –Recovering, but in search of resilience

FX reserves have recovered since 2014, with                                             Vulnerability to changing risk appetite
some exceptions                                                                         Non-resident holdings of local currency public debt, %
FX reserves, USD bn                                                                     45
45
                2018 (latest
                 available)                                                             40
40

35                                                                                      35

30             End-2014                                                                 30

25                    End-2016                                                          25

20
                                                                                        20

15
                                                                                        15
10
                                                                                        10
 5

                                                                                         5
 0
     Nigeria

                  Angola

                           WAEMU

                                   CEMAC

                                           Kenya

                                                   Ghana

                                                           Tanzania

                                                                      Zambia

                                                                               Uganda

                                                                                         0
                                                                                             South Africa   Ghana       Zambia         Nigeria        Kenya

                                                                                                               Source: Bloomberg, Standard Chartered Research   16
SSA – Debt profile an important differentiator

Sizeable debt maturities raise refinancing needs      Reform will be key to credit assessment
Eurobond maturities (USD bn)                          Eurobond spreads, bps
        Ghana          Kenya          Zambia                      Zambin 2024             Ghana 2026             Nigeria 2027
6
        Angola         Nigeria        Cote d'Ivoire               IVTCST 2028             Senegl 2024            Gabon 2024
        Cameroon       Gabon          Senegal                     Kenint 2024             Repcam 2025            Ethopi 2026
                                                      1,600
                                                                  Repnam 2026             SOAF 2025
5
                                                      1,400

4                                                     1,200

                                                      1,000
3
                                                       800

2                                                      600

                                                       400
1

                                                       200

0
                                                         0
    201
    201
    202
    202
    202
    202
    202
    202
    202
    202
    202
    202
    203
    203
    203
    203
    203
    204
    204
    204

                                                         Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18

                                                                                Source: Bloomberg, Standard Chartered Research   17
SSA – Investors seek reassurance on reform

IMF and Africa                                                                  Significant foreign holdings of domestic debt
                                                                                Non-resident holdings of total local currency public
                                                                                debt, %
                                              Amount           Date current     45
 Country             Current status
                                             (USD mn)             prog.

                                                                                40
 Angola                     EFF                3,700               2018/21

 Cameroon                   ECF                 666                2017/20      35
 Côte d'Ivoire           ECF/EFF                899                2016/19
                                                                                30
 Gabon                      ECF                 642                2017/20

 Ghana                      ECF                 918                2015/19      25

                        SBA/SCF
 Kenya                                         1,500          Expired in 2018   20
                     (precautionary)

                                                               Cancelled in     15
 Mozambique               In talks             282.9
                                                                  2016
                                                                                10
 Senegal                    PSI*                  –                2015/18

 Tanzania                   PSI*                  –                2014/18       5
 Uganda              In talks for PCI*            –                  –
                                                                                 0
 Zambia                   In talks                –                  –                South Africa       Ghana          Zambia           Nigeria   Kenya
Source: IMF, Standard Chartered Research * non-funded programmes                Source: Local Authorities, Standard Chartered Research

                                                                                                                                                           18
FX forecasts: Our view
Forecasts – FX
End-period forecasts versus the USD
Country                  Q1-19        Q2-19     Q3-19      Q4-19       2019        2020            2021              2022
Majors
 Euro area                 1.16       1.17        1.18       1.20       1.20       1.38            1.40               1.40
 Japan                   110.00     108.00      106.00     105.00     105.00     100.00           95.00              95.00
 UK                        1.36       1.38        1.40       1.42       1.42       1.47            1.49               1.50
 Canada                    1.28       1.26        1.25       1.24       1.24       1.10            1.09               1.08
 Switzerland               0.99       0.98        0.97       0.96       0.96       0.85            0.84               0.84
 Australia                 0.74       0.75        0.76       0.78       0.78       0.84            0.80               0.80
 New Zealand               0.68       0.70        0.72       0.74       0.74       0.78            0.74               0.74
Asia
 Bangladesh               87.00      88.00       89.00      90.00      90.00      92.00           94.00           96.00
 China                     6.90       6.75        6.70       6.65       6.65       6.53            6.04            6.00
   CNH                     6.90       6.75        6.70       6.65       6.65       6.53            6.04            6.00
 Hong Kong                 7.84       7.84        7.83       7.83       7.83       7.80            7.77            7.77
 India                    73.00      74.00       74.50      75.00      75.00      76.00           77.00           78.00
 Indonesia             14700.00   14800.00    14900.00   15000.00   15000.00   15100.00        15200.00        15300.00
 Malaysia                  4.20       4.25        4.25       4.30       4.30       4.10            4.20            4.20
 Philippines              53.50      54.00       54.50      55.00      55.00      55.00           56.00           56.00
 Singapore                 1.37       1.37        1.38       1.38       1.38       1.38            1.39            1.39
 South Korea            1160.00    1160.00     1180.00    1200.00    1200.00    1100.00         1050.00         1000.00
 Sri Lanka               177.00     180.00      182.00     185.00     185.00     190.00          192.00          194.00
 Taiwan                   31.20      31.20       31.40      31.60      31.60      30.50           29.10           29.00
 Thailand                 33.00      33.00       33.25      33.50      33.50      33.50           34.00           34.00
 Vietnam               23500.00   23400.00    23400.00   23300.00   23300.00   22700.00        21500.00        21300.00
MENAP
 Bahrain                   0.38       0.38        0.38       0.38       0.38       0.38            0.38            0.38
 Egypt                    17.94      17.98       18.03      18.08      18.08      18.25           18.40           18.60
 Iraq                   1182.00    1182.00     1182.00    1182.00    1182.00    1182.00         1182.00         1182.00
 Jordan                    0.71       0.71        0.71       0.71       0.71       0.71            0.71            0.71
 Kuwait                    0.30       0.30        0.30       0.30       0.30       0.30            0.30            0.30
 Lebanon                1507.50    1507.50     1507.50    1507.50    1507.50    1507.50         1507.50         1507.50
 Oman                      0.39       0.39        0.39       0.39       0.39       0.39            0.39            0.39
 Pakistan                144.00     148.00      152.00     155.00     155.00     160.00          165.00          170.00
 Qatar                     3.64       3.64        3.64       3.64       3.64       3.64            3.64            3.64
 Saudi Arabia              3.75       3.75        3.75       3.75       3.75       3.75            3.75            3.75
 Turkey                    6.30       6.40        6.50       6.60       6.60       7.00            4.10            4.20
 UAE                       3.67       3.67        3.67       3.67       3.67       3.67            3.67            3.67

                                                                               Source: Standard Chartered Research     20
Forecasts – FX (cont’d)

End-period forecasts versus the USD

Country                  Q1-19        Q2-19    Q3-19     Q4-19      2019        2020            2021              2022
Africa
  Angola                 330.00    335.00      340.00    345.00    345.00     360.00          244.49         249.38
  Botswana                10.50     10.44       10.37     10.26     10.26       9.77            9.62           9.77
  Cameroon               565.50    560.60      555.90    546.60    546.60     475.30          468.50         468.50
  Côte d’lvoire          565.50    560.60      555.90    546.60    546.60     475.30          468.50         468.50
  The Gambia              51.50     52.03       52.95     53.50     53.50      56.97           59.84          63.00
  Ghana                    5.20      5.36        5.50      5.69      5.69       6.30            6.60           6.90
  Kenya                  104.20    104.90      106.00    106.20    106.20     106.00          107.00         107.50
  Nigeria                371.00    373.00      375.00    376.00    376.00     383.00          385.00         388.00
  Sierra Leone          8645.00   8703.00     8927.00   9160.00   9160.00   10296.00        10656.00       10901.00
  South Africa            14.10     14.00       13.90     13.70     13.70      13.00           12.50          12.70
  Tanzania              2340.00   2350.00     2380.00   2400.00   2400.00    2430.00         2450.00        2490.00
  Uganda                3820.00   3890.00     3950.00   4010.00   4010.00    4150.00         4210.00        4270.00
  Zambia                  13.00     12.80       12.70     12.60     12.60      13.20           13.60          14.00
Emerging Europe
  Czech Republic          21.81     21.54       21.27     20.83     20.83      17.39           17.14           17.14
  Hungary                280.17    277.78      275.42    270.83    270.83     202.90          196.43          196.43
  Poland                   3.58      3.50        3.43      3.33      3.33       2.86            2.79            2.79
  Russia                  64.50     64.00       63.50     63.00     63.00      63.00           55.00           56.00
Latin America
  Argentina               42.00     45.00       50.00     50.00     50.00      26.50           28.00           30.00
  Brazil                   3.50      3.40        3.75      3.75      3.75       3.20            3.50            3.75
  Chile                  700.00    710.00      725.00    740.00    740.00     580.00          575.00          600.00
  Colombia              3000.00   2950.00     2950.00   3000.00   3000.00    3200.00         3400.00         3600.00
  Mexico                  19.25     19.50       20.50     21.50     21.50      17.50           18.00           18.50
  Peru                     3.40      3.40        3.25      3.30      3.30       3.10            3.36            3.30

                                                                            Source: Standard Chartered Research    21
Tanzania- Rising risks in
                                                                 2019
                                                                                                           February 2019
                                                                                     Sarah Baynton-Glen +44 207 885 2330
                                                                                              Sarah.Baynton-Glen@sc.com
                                                                                                         Economist, Africa
                                                                                                       Standard Chartered

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Growth has been robust

 Strong growth from a regional perspective
 GDP, % y/y
   8

       Tanzania
   7

                  Kenya
   6

   5                 Uganda

   4

                                                                            SSA
   3

   2

   1

   0
            Jul-05            Jul-05     Jul-05   Jul-05    Jul-05                     Jul-05

                                                           Source: IMF WEO, National statistics agencies,   23
Inflation has been contained by soft food prices

Higher fuel prices offset by lower food prices, but potential risks ahead
Inflation, % y/y
 25

 20

                                                                                                                              Energy
 15

                     Food
 10

                                                                           Headline CPI                          BoT target
  5

  0

  -5

 -10
       Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18

                                                                                               Source: Tanzania Bureau of Statistics   24
Improving private sector credit growth is key for the outlook

NPLs dropping, PSCE recovery                                                                                                                                                                                                                                                       Growth in credit is still negative for several sectors
PSCE, % y/y, NPLs % (RHS)                                                                                                                                                                                                                                                          Credit extension by sector, % y/y
 35                                                                                                                                                                                                                                                                           14

                                         PSCE                                                                                                                                                                            NPLs                                                                           Personal
 30                                                                                                                                                                                                                                                                           12

                                                                                                                                                                                                                                                                                           Mining and quarrying
 25                                                                                                                                                                                                                                                                           10

                                                                                                                                                                                                                                                                                                    Manufacturing

 20                                                                                                                                                                                                                                                                           8
                                                                                                                                                                                                                                                                                                            Trade

 15                                                                                                                                                                                                                                                                           6
                                                                                                                                                                                                                                                                                        Hotels and restaurants

 10                                                                                                                                                                                                                                                                           4
                                                                                                                                                                                                                                                                                   Transport and communication

  5                                                                                                                                                                                                                                                                           2                        Agriculture

  0                                                                                                                                                                                                                                                                           0        Building and construction              Nov-18   Oct-18
      1/1/2011
                 5/1/2011
                            9/1/2011
                                       1/1/2012
                                                  5/1/2012
                                                             9/1/2012
                                                                        1/1/2013
                                                                                   5/1/2013
                                                                                              9/1/2013
                                                                                                         1/1/2014
                                                                                                                    5/1/2014
                                                                                                                               9/1/2014
                                                                                                                                          1/1/2015
                                                                                                                                                     5/1/2015
                                                                                                                                                                9/1/2015
                                                                                                                                                                           1/1/2016
                                                                                                                                                                                      5/1/2016
                                                                                                                                                                                                 9/1/2016
                                                                                                                                                                                                            1/1/2017
                                                                                                                                                                                                                       5/1/2017
                                                                                                                                                                                                                                  9/1/2017
                                                                                                                                                                                                                                             1/1/2018
                                                                                                                                                                                                                                                        5/1/2018
                                                                                                                                                                                                                                                                   9/1/2018

                                                                                                                                                                                                                                                                                              -40        -20         0   20      40      60       80
 -5                                                                                                                                                                                                                                                                           -2

                                                                                                                                                                                                                                                                                                                                        Source: BoT    25
In recent years expenditure has undershot targets
Fiscal deficits have undershot targets          Expenditure execution has been slow
Fiscal deficit, % of GDP                        FY18 Expenditure, % of GDP
  0                                               25

-0.5
                                                  20
 -1

                                                  15
-1.5

 -2                                               10

-2.5
                                                   5
 -3
                                                   0
-3.5

 -4

-4.5

 -5                                                       Budget estimates   Preliminary actual
        FY16       FY17        FY18      FY19

                                                                                              Source: MoFP
                                                                                                             26
Recent data points to an uptick in public sector activity

Public sector borrowing is rebounding
Net claims on central government (TZS bn and % y/
y)
 6000                                                                          60

 5000                                                                          40

 4000                                                                          20

 3000                                                                          0

 2000                                                                          -20

 1000                                                                          -40

   0                                                                           -60
        Jan-15      Oct-15           Jul-16         Apr-17   Jan-18   Oct-18

                                                                       Source: BoT   27
Narrow fiscal deficits have helped stabilise debt-to-GDP for now
                                                               Non-concessional and domestic financing
Rising public debt but still sustainable                       suggests higher costs
Debt-to-GDP, %
                                                               FY18, estimate, actual TZSbn (LHS)and % of
 45
                                                               estimate (RHS)
                                                               1800                                                   120
                                                                         Estimate   Actual   Percentage of estimate
 40                                                            1600
                                                                                                                      100
                                                               1400
 35
                                                               1200                                                   80

 30                                                            1000
                                                                                                                      60
                                                                800
 25
                                                                600                                                   40

 20                                                             400
                                                                                                                      20
                                                                200
 15
                                                                  0                                                   0

 10

  5

  0
      2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
                                                                                                        Source: BoT, MoFP   28
Disbursement of grants has fallen significantly

In July-November 2018, just 17.2% of budgeted grants were disbursed by development partners
Grants, TZS bn
                                                                                                                                                                                            1600

                                                                                                                                                                                Thousands
  200                                                                                                                                                                                                        Budget                Actual

  180                                                                                                                                                                                       1400

  160
                                                                                                                                                                                            1200
  140

  120                                                                                                                                                                                       1000

  100
                                                                                                                                                                                            800
   80
                                                                                                                                                                                            600
   60

   40
                                                                                                                                                                                            400
   20
                                                                                                                                                                                            200
    0
        7/1/2016
                   9/1/2016
                              11/1/2016
                                          1/1/2017
                                                     3/1/2017
                                                                5/1/2017
                                                                           7/1/2017
                                                                                      9/1/2017
                                                                                                 11/1/2017
                                                                                                             1/1/2018
                                                                                                                        3/1/2018
                                                                                                                                   5/1/2018
                                                                                                                                              7/1/2018
                                                                                                                                                         9/1/2018
                                                                                                                                                                    11/1/2018

                                                                                                                                                                                              0
                                                                                                                                                                                                   FY18     July-     September   October     November
                                                                                                                                                                                                          November

                                                                                                                                                                                                                                    Source: BoT, MoFP
                                                                                                                                                                                                                                                         29
Further TZS depreciation ahead

Pressure on the currency returning                      Despite lower fuel prices, USD/bbl
USD-TZS
                                                       90
2,320
                                                       80
2,310
                                                       70
2,300
                                                       60
2,290
                                                       50
2,280                                                   Dec-17 Feb-18 Mar-18May-18 Jul-18 Aug-18Oct-18 Dec-18

2,270                                                   Lack of cashew exports adding additional
                                                        pressure, cashew export season, exports USD
2,260                                                   mn
                                                        150                               Nov-Jan export
                                                                                                          season
2,250
                                                         100
2,240

2,230                                                       50

2,220                                                        0
    Jan-18Apr-18May-18Jul-18Aug-18Sep-18Nov-18Dec-18         Jun-11 Apr-12 Feb-13 Dec-13 Oct-14 Aug-15 Jun-16 Apr-17

                                                                                                       Source: Bloomberg   30
External pressures building

 Reserves under pressure                          Early signs of a pick up in import demand
 Reserves, USDmn, and months of imports           Exports and imports, USDmn
6500                                       6.5   1,550

                       Months of imports
                                           6     1,050
6000

                                           5.5    550

5500                                               50
                                           5
                                                     Oct-18 Apr-18 Oct-17 Apr-17 Oct-16 Apr-16 Oct-15 Apr-15

                                           4.5    A wider C/A deficit driving BoP deficit
5000                                              BoP, current account, USDmn
                                           4       2,000
       Reserves (USD
            bn)
4500                                                     0
                                           3.5
                                                  -2,000

                                                  -4,000
4000                                       3

                                                  -6,000
                                                              2014       2015        2016          2017       Year End
                                                                                                              Nov 2018

                                                                                   Source: BoT, IMF, Reuters Datastream   31
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likely future movements in rates or prices or represent that any such future movements will not exceed those shown in any illustration. Future changes in such laws, rules, regulations, etc., could affect the information in this document, but SCB is under no obligation to keep
this information current or to update it. Expressions of opinion are those of SCB only and are subject to change without notice. Japan: This document is being distributed to Specified Investors, as defined by the Financial Instruments and Exchange Law of Japan (FIEL), for
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Kenya. The information in this document is provided for information purposes only. The document is intended for use only by Professional Clients and should not be relied upon by or be distributed to Retail Clients. Korea: This document is being distributed in Korea by, and
is attributable to, Standard Chartered Bank Korea Limited which is regulated by the Financial Supervisory Service and Financial Services Commission. Macau: This document is being distributed in Macau Special Administrative Region of the Peoples' Republic of China,
and is attributable to, Standard Chartered Bank (Macau Branch) which is regulated by Macau Monetary Authority. Malaysia: This document is being distributed in Malaysia by Standard Chartered Bank Malaysia Berhad only to institutional investors or corporate customers.
Recipients in Malaysia should contact Standard Chartered Bank Malaysia Berhad in relation to any matters arising from, or in connection with, this document. Mauritius: Standard Chartered Bank (Mauritius) Limited is regulated by both the Bank of Mauritius and the
Financial Services Commission in Mauritius. This document should not be construed as investment advice or solicitation to enter into securities transactions in Mauritius as per the Securities Act 2005. New Zealand: New Zealand Investors should note that this document
was prepared for “wholesale clients” only within the meaning of section 5C of the Financial Advisers Act 2008. This document is not directed at persons who are “retail clients” as defined in the Financial Advisers Act 2008. NOTE THAT STANDARD CHARTERED BANK
(incorporated in England) IS NOT A “REGISTERED BANK” IN NEW ZEALAND UNDER THE RESERVE BANK OF NEW ZEALAND ACT 1989, and it is not therefore regulated or supervised by the Reserve Bank of New Zealand. Pakistan: The securities mentioned in this
report have not been, and will not be, registered in Pakistan, and may not be offered or sold in Pakistan, without prior approval of the regulatory authorities in Pakistan. Philippines: This document may be distributed in the Philippines by Standard Chartered Bank
(Philippines) (“SCB PH”), which is regulated by Bangko Sentral ng Pilipinas (telephone no.: +63 708-7701, website: www.bsp.gov.ph). This document is directed to Qualified Buyers as defined under Section 10.1 (L) of Republic Act No. 8799, otherwise known as the
Securities Regulation Code (“SRC”), other corporate and institutional clients only. This document is for information purposes only. SCB PH does not warrant the appropriateness and suitability of any security, investment or transaction that may have been discussed in this
document with respect to any investor. Users of this document are required to undergo SCB’s appropriateness and suitability determination process prior to engaging with SCB on any transaction involving any of the securities that may have been mentioned in this
document. Nothing in this document constitutes or should be construed as an offer to sell or distribute securities in the Philippines, which securities, if offered for sale or distribution in the Philippines, are required to be registered with the Securities and Exchange
Commission unless such securities are exempt under Section 9 of the SRC or the transaction is exempt under Section 10 thereof. Singapore: This document is being distributed in Singapore by SCB Singapore branch (UEN No.:S16FC0027L) and/or Standard Chartered
Bank (Singapore) Limited (UEN No.: 201224747C) only to Accredited Investors, Expert Investors or Institutional Investors, as defined in the Securities and Futures Act, Chapter 289 of Singapore. Recipients in Singapore should contact SCB Singapore branch or Standard
Chartered Bank (Singapore) Limited (as the case may be) in relation to any matters arising from, or in connection with, this document. South Africa: Standard Chartered Bank, Johannesburg Branch (“SCB Johannesburg Branch”) is licensed as a Financial Services
Provider in terms of Section 8 of the Financial Advisory and Intermediary Services Act 37 of 2002. SCB Johannesburg Branch is a Registered Credit Provider in terms of the National Credit Act 34 of 2005 under registration number NCRCP4. Thailand: This document is
intended to circulate only general information and prepare exclusively for the benefit of Institutional Investors with the conditions and as defined in the Notifications of the Office of the Securities and Exchange Commission relating to the exemption of investment advisory
service, as amended and supplemented from time to time. It is not intended to provide for the public. UAE: For residents of the UAE – Standard Chartered Bank UAE does not provide financial analysis or consultation services in or into the UAE within the meaning of UAE
Securities and Commodities Authority Decision No. 48/r of 2008 concerning financial consultation and financial analysis. UAE (DIFC): Standard Chartered Bank, Dubai International Financial Centre (SCB DIFC) having its offices at Dubai International Financial Centre,
Building 1, Gate Precinct, P.O. Box 999, Dubai, UAE is a branch of Standard Chartered Bank and is regulated by the Dubai Financial Services Authority (“DFSA”). This document is intended for use only by Professional Clients and is not directed at Retail Clients as defined
by the DFSA Rulebook. In the DIFC we are authorized to provide financial services only to clients who qualify as Professional Clients and Market Counterparties and not to Retail Clients. As a Professional Client you will not be given the higher retail client protection and
compensation rights and if you use your right to be classified as a Retail Client we will be unable to provide financial services and products to you as we do not hold the required license to undertake such activities. United States: Except for any documents relating to
foreign exchange, FX or global FX, Rates or Commodities, distribution of this document in the United States or to US persons is intended to be solely to major institutional investors as defined in Rule 15a-6(a)(2) under the US Securities Exchange Act of 1934. All US
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effect any transaction in any security or financial instrument mentioned herein, must do so by contacting a registered representative of Standard Chartered Securities North America, LLC, 1095 Avenue of the Americas, New York, N.Y. 10036, US, tel + 1 212 667 0700. WE
DO NOT OFFER OR SELL SECURITIES TO U.S. PERSONS UNLESS EITHER (A) THOSE SECURITIES ARE REGISTERED FOR SALE WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND WITH ALL APPROPRIATE U.S. STATE AUTHORITIES; OR
(B) THE SECURITIES OR THE SPECIFIC TRANSACTION QUALIFY FOR AN EXEMPTION UNDER THE U.S. FEDERAL AND STATE SECURITIES LAWS NOR DO WE OFFER OR SELL SECURITIES TO U.S. PERSONS UNLESS (i) WE, OUR AFFILIATED COMPANY
AND THE APPROPRIATE PERSONNEL ARE PROPERLY REGISTERED OR LICENSED TO CONDUCT BUSINESS; OR (ii) WE, OUR AFFILIATED COMPANY AND THE APPROPRIATE PERSONNEL QUALIFY FOR EXEMPTIONS UNDER APPLICABLE U.S. FEDERAL
AND STATE LAWS. Any documents relating to foreign exchange, FX or global FX, Rates or Commodities to US Persons, Guaranteed Affiliates, or Conduit Affiliates (as those terms are defined by any Commodity Futures Trading Commission rule, interpretation, guidance,
or other such publication) are intended to be distributed only to Eligible Contract Participants are defined in Section 1a(18) of the Commodity Exchange Act. Zambia: Standard Chartered Bank Zambia Plc (SCB Zambia) is licensed and registered as a commercial bank
under the Banking and Financial Services Act Cap 387 of the laws of Zambia and as a dealer under the Securities Act, No. 41 of 2016. SCB Zambia is regulated by the Bank of Zambia, the Lusaka Stock Exchange and the Securities and Exchange Commission.
© 2018 Standard Chartered Bank. All rights reserved. Copyright in third party materials is acknowledged and is used under licence. You may not reproduce or adapt any part of these materials for any purposes unless with express written approval from Standard Chartered
Bank.

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