By George Obulutsa DAR ES SALAAM (Reuters) - Tanzania's economic growth is seen slowing to 4-5 percent from a previous estimate in 2008 of 7.5 percent due to the global economic downturn, the International Monetary Fund said on Tuesday. Inflation is also expected to fall to 7 percent by year end from 13.3 percent as of February because of lower food prices. "The global financial crisis will pose a challenge for Africa and Tanzania. We forecast a growth rate for Tanzania for 2009 to be between 4 and 5 percent," Roger Nord, head of an IMF mission to the east African country, told reporters. Last week, the Finance Ministry forecast Tanzania's economy growing by 6.5 percent this year, much higher than the central Bank of Tanzania's projection of 5-6 percent. Tourism, mining and agriculture are the main economic pillars of the country of about 40 million people. But contributions from financial services, telecoms and manufacturing have also been increasing in recent years. Nord told Reuters he expected inflation to ease to 7 percent by December, compared with 13.3 percent in February. Tanzania's average annual inflation for the whole of 2008 was 10.3 percent. The global financial downturn has not spared Tanzania, slashing growth and remittances, hurting commodity prices and important industries like tourism. In June 2008, the government had projected its economic growth to accelerate to 9.2 percent in 2011. The IMF expects growth across sub-Saharan Africa to slow to 3 percent this year, half the rate of the past five years. SPACE FOR BORROWING Nord said that in light of an expected drop in food price inflation, Tanzania had room to ease its monetary policy going forward. The IMF predicted 7.5 percent growth for 2008. Nord said prudent fiscal policy in recent years had given Tanzania some room to allow its 2008/09 fiscal budget deficit to widen by up to 3 percent of GDP. "Some further fiscal stimulus can be envisaged in the 2009/10 budget currently under preparation. Short-term economic stimulus must, however, not jeopardise medium-term economic stability," Nord told reporters. He said the government could do some domestic borrowing to plug any deficits this year and next resulting from tax revenue shortfalls -- as long it did not crowd out private borrowers. He added that he expected the country's current account deficit to narrow this year thanks to falling oil prices, but that it would rise again next year as the impact of falling exports and tourism earnings started to be felt. "Exports are falling and tourism is falling. The current account is likely to be a little bit bigger," Nord told Reuters. Tanzania's current account deficit stood at $2.82 billion at the end of 2008. | 
