NEW SCENARIO

Risk Briefing's risk scenarios are potential developments that might substantially change the business operating environment over the coming two years. We analyse the drivers, provide the context and conclude with recommended action. The following scenario has been added to the latest country update.

MACROECONOMIC RISK

A second wave of the coronavirus threatens economic recovery

Moderate probability; V high impact; Risk intensity = 15

The Economist Intelligence Unit's core forecast is that real GDP will slow sharply, to 1.9% for full-year 2020, as the economy recovers in the second half of the year after a probable contraction in the second quarter. The president, John Magufuli, claims that the coronavirus (Covid-19) has been eliminated, with the country having stopped publishing data on testing in late April; the last published update on April 29th reported a total caseload of 509 infections and 21 deaths. The president's claims were initially derided by critics, given low levels of testing, a lack of transparency and conflicting test results at the borders. Even if Tanzania has benefited from a mild initial phase, there remains a high risk of a second wave of infections, especially owing to an uptick in international arrivals after the country reopened its airports and borders in May following a month-long closure. The risk of a more severe second wave (or a resurgent first wave) is compounded by the upcoming elections on October 28th, which could speed viral transmission via rallies, meetings and polls. If authorities fail to adequately prepare for the possibility of a second wave of infections after the elections, the country may be forced into a hasty lockdown, which will have severe consequences for the economy. We currently attach a moderate risk to the possibility of a lockdown, given that one was avoided during the first wave as the government prioritised the economy. Nonetheless, given that the government continues to downplay the coronavirus threat, external-facing businesses (such as traders) could especially suffer if orders are held up at borders owing to testing restrictions in other countries. Businesses should monitor alterations in coronavirus-related strategies of the national government for a possible second wave in the months ahead. They could mitigate the adverse effects of a potential lockdown by stockpiling production for orders and setting aside adequate cash buffers to compensate for possible shortfalls in operating liquidity.