The National Bureau of Statistics of Tanzania (NBS) reveals that the Annual Headline Inflation Rate for June 2021 has increased to 3.6% from 3.3% recorded…
The Economy of Tanzania in 2020
With an average real GDP growth rate of 6.3% over the past decade (2010-2019), Tanzanian is among the fastest-growing economies in Africa and in the world.
According to the IMF, the real GDP of Tanzania grew by 4.8% in 2020 reaching USD 64.4 billion versus USD 60.8 billion in 2019.
The Fund projects a GDP growth for Tanzania of +4.0% and +5.1% in 2021 and 2022, and 6.0% in 2026.
However, in its East Africa Economic Outlook 2021 report, the AfDB estimates that Tanzania’s GDP will grow by 2.8% in 2021, and projecting a strong rebound for 2022 and 2023 with 4.9% and 6.3% economic growth respectively.
Tanzania Key Economic Sectors
According to the economic data included in the National Data of Tanzania Mainland of 2013-2019 by the National Bureau of Statistics, at current market prices, Services made the highest shares of GDP (40.0%) followed by Industry and Construction (31.1%) and Agriculture, Forestry and Fishing (28.9%)
In November 2020, President Magufuli announced that in the next five years its government will put great emphasis on key economic sectors, especially agriculture, livestock, fisheries, industry, mining, trade, and tourism.
The Economy of Tanzanian in 2021 and Beyond
The African Development Bank (AfDB) projected Tanzania’s GDP growth to remain stable at 6.4% in 2020 and 6.6% in 2021, subject to favorable weather, prudent fiscal management, mitigation of financial sector vulnerabilities, and implementation of reforms to improve the business environment.
Similarly, the Bank of Tanzania (BoT) estimated the country’s GDP to be 5.5% in 2020 on the basis of the domestic and external economic environment, and economic recovery in 2021 is projected to be more gradual than anticipated.
The positive outlook is driven by expected value-added in agriculture due to adequate rains, public investment, increase in export earnings from mining contributed by high world market prices of gold, and private sector investment, coupled with supportive monetary and fiscal policies.
In April 2021, Tanzania’s new president Samia Suluhu Hassan gave her first speech to the parliament, mentioning the priorities of the Sixth Phase Government in the next five years to reach a GDP growth rate of at least 8% yearly.
However, the IMF projects a GDP growth for Tanzania of +4.0% and +5.1% in 2021 and 2022, and 6.0% in 2026.
In August 2021, the Bank of Tanzania (BOT) released its Economic Bulletin of June 2021 revealing that in the quarter ending March 2021, the economy of Tanzania grew by 4.9% compared with 5.9% in the corresponding quarter in 2020. Mining and quarrying recorded the highest growth of 10.2% attributed to an increase in the production of gold, coal, and gypsum.
But the AfDB projects a slightly faster economic growth of 4.9% in 2022 and 6.3% in 2023.
Tanzania Gross National Income (GNI)
Tanzania’s GNI per capita rose by 6.1% during the ten-year period 2010–2019, from USD 720 to USD 1,080.
In 2019, Tanzania became a middle-income country with a GNI per capita of USD 1,080, against an average of USD 1,550 in Sub-Saharan Africa.
In the first semester of 2021, the average inflation rate in Tanzania was 3.3% and remained well within the range set in the 3rd Tanzania Five-Year Development Plan (FYDP III) between 3.0% and 5.0% over the medium term.
The WB estimates that Tanzania’s current low and stable headline inflation is favored by low domestic food prices. The Bank forecasts that in 2021 inflation will remain stable at 3.5%.
BoT projects inflation to remain low in Mainland Tanzania, in the range of 3.0% to 5.0% in the remainder of 2020/21, as earlier projected in June 2020.
The projection is underpinned by the adequate food supply, anticipated low global oil prices, and stability of the exchange rate.
On 26th January 2021, the average market exchange rates (source xe.com) for the Tanzanian shilling (TZS) against major currencies provided were: USD/TZS 2,319.1, GBP/TZS 3,168.9, EUR/TZS 2,814.8, RMB/TZS 358.3.
The TZS weakened by more than 25% against the USD over the past five years, from an average annual exchange rate of 1,735 in 2015 to 2,320 in the second half of 2020.
However, the Tanzanian shilling was fairly stable against the US dollar throughout 2019/20, supported by low and stable inflation, moderate current account deficit, prudent monetary and fiscal policies, and measures taken to ensure the orderly functioning of the foreign exchange market.
Tanzania is a net importer with a negative balance of trade of USD -3,095.9 million in the year ended November 2019 (latest BOT data).
The value of exports of goods and services amounted to USD 8,839.9 million in the year ended November 2020, lower than USD 9,460.8 million in the year ended November 2019, due to a decline in services receipts (mainly tourism affected by Covid-19).
In 2018, Tanzania’s top exports were gold (USD 892 m), tobacco (USD 333 m), raw copper (USD 231 m), refined copper (USD 150 m), and other furniture (USD 147 m), exporting mostly to Rwanda, Kenya, the DRC, Zambia, and Uganda.
The top imports of Tanzania were refined petroleum (USD 1.77 b), palm oil (USD 280 m), packaged medicaments (USD 220 ), cars (USD 191 m), and wheat (USD 182 m), importing mostly from China, India, UAE, Saudi Arabia, and South Africa.
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 by social welfare and education (17%), and energy and mining (15%).
FDI net inflows in Tanzania were USD 1.1 billion in 2018 representing an 18% increase compared to 2017 (USD 938 m) but a 30% decrease from the peak reached in 2015 at USD 1.56 b.
The mining sector, the oil and gas industry, as well as the primary agricultural products sector (coffee, cashew nuts, and tobacco) drew most of the FDI.
The top five providers of FDI into Tanzania are South Africa, the UK, Kenya, Canada, and China.
In the WB Doing Business Report of 2020, Tanzania ranked 141st among 190 countries and ranked 4th in the East African Community (EAC) for the ease of doing business. The country is currently implementing the “Blueprint for Regulatory Reforms to Improve the Business Environment in Tanzania” and aims to raise its score to at least 100.
Last Updated: 2nd November 2021
Sources: African Development Bank (AfDB), Bank of Tanzania (BoT), Foreign Service Institute of the US Department of State, International Monetary Fund (IMF), United Nations Conference on Trade and Development (UNCTAD), Tanzania National Bureau of Statistics, World Bank (WB).
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