Tanzania Economy

Over the past decade (2010-2019) Tanzania’s economy experienced strong growth with an average real GDP increase of 6.3% while in 2019, Tanzania’s GDP growth rate slowed to 5.8%.

Tanzania’s GDP reached USD 55.5 billion in 2019, making it the 2^nd largest economy in East Africa after Kenya and the 7^th largest in Sub-Saharan Africa.

The leading contributors to the economy of Tanzania in 2018 were services (37%), followed by agriculture (28%), industry and construction (27%), and others (8%).

The World Bank (WB) forecasts the economic growth of Tanzania to slow sharply in 2020, to 2.5% because of the impact of the COVID pandemic on the Tanzanian economy which has affected the labor market, production capacity, and productivity. Tourism has halted, and exports of manufacturing and agricultural goods slumped.

In June 2020, the IMF approved debt relief to provide Tanzania USD 14.3 million in grant over the next 4 months, and potentially up to USD 25.7 million over the next 23 months, to free up resources for public sector health needs and other emergency spending, as well as mitigate the balance of payments shock resulting from the pandemic.

In 2019, Tanzania’s annual inflation rate remained at 3.5%, similar to 2018, while it has significantly decreased from the 6.2% in 2010.

The WB classifies Tanzania as a lower middle-income economy with a GNI per capita of USD 1,080 in 2019, against an average of USD 1,550 in Sub-Saharan Africa.

Tanzania’s budget focuses on the country’s development plan to build an industrial economy and improve the welfare of the citizens. To facilitate this, the focus of Tanzania’s 2020/21 budget will be on projects that utilize raw materials within agriculture, mining, and natural gas.

In 2018, Tanzania’s FDI net inflows were USD 1.1 billion representing an 18% increase compared to 2017 (USD 938 million). Tanzania is drawing external investments mostly to the mining sector, the oil and gas industry, and agriculture.

Tanzania Gross Domestic Product (GDP)

Tanzania’s real GDP reached USD 55.4 billion in 2019 versus USD 52.4 billion in 2018 and USD 32 billion in 2010 with an average year-on-year growth of 6.3%.

Tanzania’s annual GDP growth rate of 6.3% over the past 10 years (2010-2019) placed the country among the 20 fastest growing economies in the world, beating the Sub-Saharan Africa average GDP growth rate of 3.5% during the same period.

However, the GDP growth of Tanzania has been slowing down in recent years, from a peak of 7.7% in 2011 to 5.8% in 2019.

Tanzania is currently pursuing its National Five Year Development Plan 2016/17-2020/21. As per the objectives of the Plan, Tanzania aims to raise its annual real GDP growth to 10% by 2021.

However, the International Monetary Fund (IMF) estimates that the growth of Tanzania’s economy will be 4.2% in 2020.

Tanzania Gross National Income (GNI)

The WB classifies Tanzania as a lower middle-income economy with a GNI per capita of USD 1,080 in 2019, against an average of USD 1,550 in Sub-Saharan Africa.

GNI per capita in Tanzania rose by 6.1% during the ten-year period 2010–2019, from USD 720 to USD 1,080 and by 5.9% over the past one year, from USD 1,020 in 2017.

Tanzania became a middle-income country in 2019 achieving the aim of the 2025 Vision of the Tanzanian Ministry of Finance and Planning.

Tanzania Inflation

In 2019, Tanzania’s annual inflation rate remained at 3.5%, similar to 2018, while it has significantly decreased from the 6.2% in 2010 due to improved food supply.

Tanzania’s 2019 inflation of 3.5% remains significantly below the Government’s medium-term ceiling of 5% outlined in Tanzania’s 2020/21 budget.

The WB consistently estimates that Tanzania’s current low and stable headline inflation is favored by low domestic food prices. The Bank forecasts that in 2020 and 2021 inflation will remain stable at 3.8% and 3.5% respectively.

Tanzania Exchange Rates

On 12^th August 2020, average market exchange rates for the Tanzanian shilling (TZS) against major currencies provided were: USD/TZS 2,325, GBP/TZS 3,033, EUR/TZS 2,737, TZS/RMB 0.003.

The TZS weakened by more than 50% against the USD over the past five years, from an average annual exchange rate of 1,735 in 2015 to 2,325 in 2020.

Still, the Tanzanian shilling remained stable during 2019 and depreciated with 0.7% against the USD. The low volatility was in part due to interventions by the Bank of Tanzania (BoT) aimed at keeping the interbank foreign exchange market steady.

Tanzania Balance of Trade

Tanzania is a net importer with imports totaling USD 7.5 billion in 2018 against USD 4.8 billion worth of exports.

Tanzania’s import consists mostly of petroleum products (36%), transport (11%), food (11%), raw materials (11%), machinery (9%), and other consumer goods (21%)

Tanzania’s export consists mostly of food items (41%), followed by others (35%), manufactured goods (14%), ores and metals (7%), and agricultural raw materials (4%).

The country’s top five trading partners are India, the United Arab Emirates, South Africa, Switzerland, and China.

Tanzania National Debt

As of December 2019, Tanzania’s total national debt amounts to USD 28.6 billion with external debt accounting for 78% of the total and domestic debt with 22%.

Tanzania’s external debt amounted to USD 22.4 billion (40% of GDP) in December 2019 representing a 6% YoY increase (2018: USD 21.06 billion).

Tanzania’s domestic debt amounted to USD 6.3 billion (11% of GDP) in December 2019 representing a 1% YoY decrease (2017: USD 6.2 billion).

The Tanzanian Central Government is the largest borrower holding 78% of the country’s external debt, followed by the private sector (21%), and public corporations (0.4%).

The funds were allocated mostly to the transport and telecommunications sectors (27%), followed social welfare and education (17%), and energy and mining (15%).

Tanzania Foreign Direct Investment (FDI)

FDI net inflows in Tanzania were USD 1.1 billion in 2018 representing an 18% increase compared to 2017 (USD 938 million) and a 30% decrease from the peak reached in 2015 at USD 1.56 billion.

The mining sector, the oil and gas industry, as well as the primary agricultural products sector (coffee, cashew nuts and tobacco) drew most FDI.

The top five providers of FDI into Tanzania are South Africa, UK, Kenya, Canada, and China.

Investors are attracted to the country’s commitment to implementing sound macro-economic policies, its effective privatization program and rich natural resources. However, low levels of industrial development, environmental concerns, lack of transparency and poor compliance with legislation are obstacles to investment.

The WB emphasizes that implementing a government policy for improved business environment and subsequently, increased FDI inflows is crucial to sustaining the country’s economic growth.

In the WB’s latest Doing Business 2019 report, Tanzania ranked 144 in ease of doing business out of 190 countries. In 2017/18, the country has implemented a positive change in making it easier to start a business by launching online company registrations and thus reducing time and costs for entrepreneurs.