Tanzianan economy overview
The East African nation of Tanzania has an estimated population of 50 million as of 2016. The country has maintained relatively stable, high growth over the last decade (averaging 6%-7% per annum). While the poverty rate has recently declined, the absolute number of the poor has not changed given the fast pace of population growth (over 3% per annum).
Political stability remains the cornerstone of Tanzania's strong economic performance. In October 2015, John Pombe Magufuli, was elected the fifth President of the United Republic of Tanzania.
Overall for 2016, the Tanzanian economy has shown resilience amid flagging growth in Sub-Saharan Africa.
Real GDP growth for the year is estimated at nearly 7% despite a softening of growth in the second half of the year. Agricultural production increased over the previous year. Non-manufacturing industrial growth softened as a whole as the substantial deceleration of construction and slump in the generation of electricity more than offset strong growth in the mining and quarrying sub-sector. Services maintained solid performance overall.
The inflation rate has remained low and near the authorities'
medium-term target of 5%, although it has trended upward in recent
months following a tightening of the food supply and rising energy
The current account deficit narrowed significantly in 2016 as exports grew modestly and imports fell significantly, especially for capital goods.
Gross international reserves stood at $4.3 billion at the end of January 2017, a level sufficient to finance the equivalent of approximately four months of projected imports of goods services. The value of the shilling remained stable in 2016, following considerable volatility in 2015.
The last completed budget (2015/16) saw significant overruns in
recurrent spending and significant shortfalls in development spending,
with the latter due to delays in securing funding. The fiscal deficit
stood at 3.5% of GDP.
The 2016/17 budget called for a fiscal deficit increase to accommodate higher levels of public investment and the clearance of verified arrears.
However, the implementation of it up until December 2016 also experienced significant development underspending, largely explained by external financing shortfalls. Domestic revenue mobilization has been bolstered by strong measures to reduce tax exemptions and curb tax evasion and corruption.
Though the poverty rate fell from 60% in 2007 to an estimated 47% in
2016, based on the $1.90 per day global poverty line, about 12 million
Tanzanians still live in extreme poverty earning less than US$ 0.60
Many hover just over the poverty line and risk falling back into poverty in the event of socio-economic shocks.
Universal education, scrapping contributions for primary and secondary school, has drastically increased primary school enrolment.
The prospects of the economy lean on investing in bottleneck-releasing
infrastructure; improving the business environment; increasing
agricultural productivity and value addition; improving service
delivery to build a healthy and skilled workforce; and better managing
With approximately 800,000 youth entering into labor force every year, nurturing a vibrant private sector to provide productive jobs to those new to the labor market is critically important.
Tanzania embarked upon its second Five Year Development Plan 2016/17
to 2020/21 (FYDP II), which, among other things, picks up
interventions which fell short under MKUKUTA II and FYDP I.
With its implementation based on a credible and realistic financing plan, the country's fiscal and debt sustainability will be maintained.
The private sector can also be leveraged, not only as a source of financing FYDP II through public private partnerships (PPPs), but also as the actual driver of industrialization.
Tanzania Gross Domestic Product (GDP)
Tanzania's GDP (at current market prices) was USD 44.5bn in 2015
versus USD 31.4bn in 2010.
Tanzania's annual GDP growth rate averaged 7% over the past 5 years, making it one of the 20 fastest growing economies in the world and beating the Sub-Saharan Africa average GDP growth rate of 4.4% during the same period.
According to the International Monetary Fund (IMF) the economy of Tanzania will grow by 7.2% in 2016 and by 7.1% in 2017, while the World Bank (WB) estimates for the same period are 6.8% and 7%.
During the same period the WB estimates that the Sub-Saharan region's GDP is projected to grow by 4% in 2016, and 5.1% in 2017.
The Bank of Tanzania's (BOT) 2015 Financial Stability Report indicates that drivers of GDP growth include the continuous investment in infrastructure, expansion in private and public sector construction activities and improvement in external sector.
Tanzania Gross National Income (GNI)
The WB classifies Tanzania as a low-income economy according to its GNI per capita which was USD 920 in 2014, while average GNI per capita in Sub-Saharan Africa was USD 1,709. However, GNI per capita in Tanzania rose by 44% during the five-year period 2009-2014, from USD 640 to USD 920.
According to the Ministry of Finance and Planning's 2025 Vision, Tanzania aims to become a middle-income country by that year, which means that its GNI per capita should be between USD 1,045 and USD 12,736, as per the WB's criteria.
Over the past five years, Tanzania's headline inflation has been
brought down to a single digit of 5.4% in March 2016 from an average
of 12.6% during 2011.
The BOT has a single-policy objective of maintaining price stability through regulating the quantity of money in circulation and the credit supplied to the economy.
After a historical low inflation rate of 4% in January 2015, the country has experienced inflationary pressure with a peak of 6.8% in December 2015.
In January 2016, BOT's Governor Benno Ndulu announced that inflation is a challenge in East Africa now, and is mainly food driven, but it is expected to remain below 10%.
From January 2016, Tanzania has been experiencing deflationary pressure, decreasing its inflation rate to 5.4% in March 2016.
Tanzania Exchange Rates
On 21st April 2016, average non-cash spot exchange rates for the
Tanzanian shilling (TZS)provided by Ecobank Tanzania were: USD/TZS
2,188, GBP/TZS 3,143, EUR/TZS 2,486.5, KSH/TZS 22.59, ZAR/TZS 145.04,
JPY (per 100)/TZS 1,846.8, and CNY/TZS 353.2.
The TZS weakened by more than 40% against the USD over the past five years, from an average annual exchange rate of 1,396 in 2010 to 1,985 in 2015.
Still, the shilling remained stable during the first quarter of 2016, depreciating by only 1.3% compared to 6.4% in the corresponding quarter of 2015.
Tanzania Balance of Trade
The balance of trade of Tanzania resulted in a trade deficit of USD
3bn in 2015.
However, the trade gap shrank by 35% over the past five years, from USD 5bn in 2010.
During the same period export of goods increased by 85%, from USD 5bn to USD 9.5bn.
Imports grew by 27%, from USD 9.8bn to USD 12.5bn.
Tanzania National Debt
Tanzania's national debt amounted to USD 19bn in September 2015, with
a national debt to GDP ratio of 39.5%. External debt accounted for 81%
of the Tanzanian national debt and domestic debt for only 19%.
National debt to GDP ratio increased by 4.1% during the period 2010-2015, however it decreased by 28% over the past 10 years.
Tanzania Foreign Direct Investment (FDI)
FDI net inflows in Tanzania rose by 13% from USD 1.8bn in 2010 to USD
2.04bn in 2014, making the country the first FDI destination in East
Investments in Tanzania increased largely thanks to the recent discoveries of 45 trillion cubic feet of natural gas reserves, the 2015 World Investment Report of the United Nations Conference on Trade and Development (UNCTAD) indicates.
According to the Foreign Service Institute of the US Department of State, the top five providers of FDI into Tanzania are South Africa, UK, Kenya, Canada, and China.
Tanzania GDP Composition
Tanzania's agriculture output was USD 13.9bn in 2014, accounting for
29% of the country's GDP.
The BOT's February 2016 Monthly Economic Review indicates that the Tanzanian agricultural exports (including fish and horticultural products) reached USD 1bn, accounting for 20% of the total value of Tanzania's exports in 2014.
The most exported crops include tobacco, cashew nuts, and coffee.
Raw tobacco accounted for 28% of the total agricultural exports or USD 302m in 2014 compared to USD 112m in 2009.
The tourism sector is Tanzania's number one foreign currency earner.
Visitor exports generated USD 2bn in 2014 (i.e. 21% of total exports).
The total contribution of tourism to Tanzania's GDP in 2014 equaled 9.3% with USD 4.5bn, the 2015 Economic Impact Report for Tanzania of the World Travel and Tourism Council (WTTC) indicates.
International tourist arrivals increased by 90%, from 622,000 to 1.1m during the period 2006-2014, making Tanzania the 7th destination in the Sub-Saharan region after South Africa, Zimbabwe, Mozambique, Uganda, Kenya, and Namibia.
The WTTC projects that the Tanzanian tourism sector will rise by 4.9% (to 7.7% of GDP) in 2015-2025.
Tanzanian mining output totaled USD 1.8bn in 2014 or 3.7% of the
The BOT's February 2016 Monthly Economic Review shows that mineral exports accounted for USD 1.4bn of the total value of Tanzania's exports in 2014 (i.e. 27%), with gold representing more than 90% of the country's mineral exports.
According to the Tanzania Chamber of Minerals and Energy, gold production in Tanzania stands at 40 tons per year which makes it the 4th largest gold producer in Africa after South Africa, Ghana, and Mali.
While Tanzania's gold production increased by more than 700% over the past 25 years, from 5 to 40-50 tons per year, South Africa's production of gold decreased from over 500 tons in 1990 to 140 tons in 2015, as reported by the US Geological Survey's website.
Tanzania Exports Shrink 3% in March 2017 but Gold and Cashew Nuts See Strong Growth.
The Bank of Tanzania (BOT) published its Monthly Economic Review of
April 2017, showing that the annual export value of Tanzanian goods
and services amounted to USD 8,921.7 ending March 2017, about -3.0%
lower than the year ending March 2016.
A decline occurred in manufactured goods and to a small extent in non-traditional exports; otherwise earnings from travel-which is mainly tourism-remained fairly unchanged over the two periods.
The performance of traditional exports was mixed across the categories
during the year ending March 2017, with the total value increasing by
USD 119.2 million to USD 872.8 million (+15.8%).
The export value of cashew nuts dominated the improvement, as it nearly doubled the value recorded in the year ending March 2016, on account of increase in both volume and price.
By contrast, export values of cloves, sisal, tea and tobacco declined. The decline in the values of sisal, tea and tobacco was in volume while that of cloves was of both volume and price. BOT notes that the prices for most of the traditional exports declined consistent with the general trend in the world market.
The value of non-traditional exports was USD 3,950.4 million in the
year ending March 2017, lower than USD 4,380.2 million in the year
ending March 2016 (-9.8%). However, there were variations in
performance across categories of non-traditional exports. Export value
of gold, which dominates non-traditional exports, rose by +23.9% to
USD 1,494.1 million owing to a sustained recovery in gold price in the
world market in the recent periods, as well as an increase in export
Exports of horticultural products also increased, by +6.3% to USD 25.2 million. On the other hand, manufactured goods declined with most of the decline occurring in export value of iron and steel products and edible oil.
As regards foreign earnings from service, there was an increase to USD
3,616.2 million (+1.9%) in the year ending March 2017 from USD 3,547.1
million in the year ending March 2016, as a result of the increase in
travel and transport receipts which rose by +2.3% and 4.5%
Travel receipts increased following an increase in the number of tourist arrivals while transport receipts increased on account of transit goods to and from neighboring countries.