TANZANIAINVEST has interviewed Mr. Louis Accaro, Programme Executive Director of the Tanzania Private Sector Foundation (TPSF), to assess the importance, challenges, and development of Tanzania’s…
The Economy of Tanzania – 2021 Update
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.
In 2019, the Tanzanian economy grew by 5.8% reaching a GDP of USD 55.5 billion, making it the 2nd largest economy in East Africa after Kenya and the 7th largest in Sub-Saharan Africa.
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 Tanzanian Economy in 2020 and 2021
The World Bank (WB) expects the economic growth of Tanzania to slow to 2.5% in 2020 due to the Covid-19 pandemic which has affected the labor market, production capacity, and productivity. Tourism has halted, and exports of manufacturing and agricultural goods slumped.
However, 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 economic growth to be 5.5% in 2020 and project a GDP growth of 6% in 2021 despite the impact of the Covid-19 pandemic.
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 June 2020, the IMF approved a debt relief package for Tanzania of USD 14.3 million in grant over the next 4 months, and potentially up to USD 25.7 million over the next 23 months.
The grant will free up resources for public sector health needs and other emergency spendings, as well as mitigate the balance of payments shock resulting from the pandemic.
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%.
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 which includes among the objectives an annual real GDP growth of 10% by 2021.
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, given the slowing down of the economy in recent years and the impact of the Covid-19 pandemic, these objective is highly unrealistic.
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 2020, Tanzania’s annual inflation rate was 3.3%, significantly below the Government’s medium-term ceiling of 5% outlined in Tanzania’s 2020/21 budget.
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: 14th April 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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