The African Development Bank (AfDB) has just released the 2024 edition of its flagship African Economic Outlook report, describing Africa’s growth potential as ‘remarkable’.
The theme of the 2024 African Economic Outlook is Driving Africa’s Transformation: The Reform of the Global Financial Architecture.
The report is being published as African countries continue to contend with significant structural challenges and multiple severe shocks, including heightened food and energy prices driven by geopolitical tensions such as Russia’s invasion of Ukraine, climate issues affecting agriculture and energy production, and persistent political instability.
This challenging environment has led to a slowdown in Africa’s real GDP growth, which dropped to 3.1% in 2023 from 4.1% in 2022
However, in his foreword, Dr. Akinwumi Adesina, President of the AfDB Group, stressed that despite entrenched structural challenges and susceptibility to exogenous shocks, most African economies have shown remarkable resilience.
And the forecast for 2024–25 looks promising, as global economic conditions brighten, creating optimism for a rebound and sustained economic growth across Africa. Real GDP growth is projected to rise to 3.7% in 2024 and consolidate higher at 4.3% in 2025.
With these outturns, Africa will remain the second-fastest region in the world after developing Asia in 2024 and 2025, with 40 countries set to achieve higher growth rates relative to 2023 levels, and East Africa leading as the fastest-growing region (up to 3.4% points).
Growth Performance and Outlook in East Africa
According to the report, East Africa, the continent’s fastest-growing region, will see real GDP growth rising from an estimated 1.5% in 2023 to 4.9% in 2024 and 5.7% in 2025. The downward revision of 0.2% point for 2024 compared with the forecast in the January 2024 Africa’s Macroeconomic Performance and Outlook (MEO) is due to larger-than-expected contractions in Sudan and South Sudan following the ongoing conflict in the former.
Recent Macroeconomic and Financial Developments in Tanzania
Tanzania’s real GDP grew 5.3% in 2023, up from 4.7% in 2022, driven by agriculture, construction, and manufacturing on the supply side and private investments on the demand side.
Tight monetary policy, together with moderation in food and energy prices, helped reduce inflation from 4.3% in 2022 to 3.8% in 2023. The Tanzanian shilling depreciated by 8% in 2023, reflecting shortages of foreign exchange.
The fiscal deficit declined slightly from 3.6% of GDP in 2021/22 to 3.5% in 2022/23, responding to expenditure controls, and was financed by external and domestic borrowing. Public debt increased from 43.6% of GDP in 2021/22 to 45.5% in 2022/23 due to an increase in loans. The current account deficit narrowed from 7.3% of GDP in 2022 to 3.8% in 2023, benefiting from higher tourism receipts, and was financed by external commercial debt and official flows.
Reserves declined from 4.7 months of import cover in 2022 to 4.5 months in 2023, explained by the authorities’ response to the foreign exchange shortage.
The banking sector, which accounts for 71% of financial assets, remained sound with the ratio of nonperforming loans to gross loans declining from 5.7% in 2022 to 4.3% in 2023, below the regulatory requirement of 5%.
Economic Outlook and Risks for Tanzania
The AfDB projects that Tanzania’s real GDP growth will reach 5.7% in 2024 and 6% in 2025, driven by agriculture, manufacturing, and tourism and supported by public investments and reforms to improve the business environment.
Inflation is projected to decline to 3.3% in 2024 and 3.4% in 2025, helped by stability in food and energy prices.
The fiscal deficit, financed by domestic and external borrowing, is expected to decline to 2.5% of GDP in 2023/24 and stabilize at that level in 2024/25, supported by improvements in revenue performance. The current account deficit, financed by external borrowing, is projected at 4.0% of GDP in 2024 and 4.2% in 2025, supported by merchandise exports and tourism receipts.
The major downside risks to the outlook include spillovers from geopolitical tensions and regional conflicts, sluggish global growth, a narrow tax base, and climate shocks.
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