The central bank of Tanzania’s (BoT) monthly economic edition of April 2020, has indicated that the impact of the coronavirus (COVID-19) on the economy became visible in March and April 2020 as Tanzania’s trade partners intensified the limit to spread of the virus.
According to the report, inflation rate remained low amidst the economic challenges caused the virus containment measures adopted to limit the spread of the COVID-19. The overall inflation remained low to 3.4 per cent in March 2020 from 3.7 per cent in February 2020.
The decrease was driven by both food and non-food inflation, hence—the report argued that “the latter having a significant impact because of large weight in the consumer basket”
The edition noted that, on the month to month overall prices rose by 1.1 per cent in March 2020 compared to 1.4 per cent in the same month last year.
“Headline inflation is projected to remain below the medium-term target of 5.0 per cent in 2020, owing to expected bumper harvests in 2019/20 crop-season and subdued demand pressure for consumer goods owing to the impact of COVID-19.”
The report also indicated a drop in food and beverages prices for the year ending in March 2020.
“Food and non-alcoholic beverages inflation eased to 5.3 per cent in the year ending March 2020 from 5.9 per cent in the previous month. The decline was driven by prices of some food, particularly wheat flour, fruits, cassava, sweet potatoes and cooking banana. On a monthly basis, food and non-alcoholic beverages inflation slowed to 1.1 per cent in March 2020 from 1.7 per cent in the corresponding month in 2019,” according to the report
Further, as the world is on lockdown, the central bank’s report indicated that “annual non-food inflation decreased to 2.2 per cent in March 2020 from 2.4 per cent in the previous month, partly due to decline in prices of some consumer goods, notably gas, cooking stove, air conditioners and jewelleries.
Prices of non-food increased by 1.0 per cent in March 2020 compared with 1.2 per cent in the corresponding month in 2019,”
In addition, the stock of food in the country which is typically held by the National Food Reserve Agency (NFRA), private traders and households were to somewhat low. The food stocks ordinarily comprise of food produced locally.
In March 2020 food stocks held by NFRA, comprising of maize only, amounted to 39,597 tonnes from 41,231 tonnes in the preceding month, nearly two times less the amount held in the corresponding month in 2019.
As Tanzania anticipates to restart its economy after being satisfied with the trend of the virus, the April report also had some insights towards the trend of exports. Thus, the virus was also noted to be a factor in the decrease in performance.
Exports of goods and services amounted to over $9 billion in the year ending March 2020 compared with over $8 billion in March 2019, largely owing to an increase in exports of traditional crops. Monthly, exports amounted to $667.6 million in March 2020, higher than $652.4 million in March 2019.
However, exports performance was lower when compared with $802.3 million in February 2020, associated with relatively modest service receipts from tourism-related activities.
The decline of receipts occurred in travel earnings on account of a decrease in tourist arrivals following travel restrictions and lockdowns due to COVID-19
On the side of traditional goods, exports rose significantly to over $1 billion in the year ending March 2020 from $569.2 million in the corresponding period in 2019, hence—the report showed that all traditional goods exports increased except coffee, tea and tobacco.
Further, cashew nuts—one of the top forex earning crop and sisal exports rose on account of both volume and prices effects.
“Increase in export of cotton and cloves was on account of volume, driven by good weather. Export of coffee, tea and tobacco decreased on account of both volume and price effects.,” report indicated.
Exports of non-traditional goods amounted to over $4 billion in the year ending March 2020 compared with over $3.5 billion in the corresponding period in 2019.
Also, all major categories of non-traditional export increased, except manufactured goods, and fish and fish products. Gold, which accounted for 55.7 per cent of non-traditional exports, increased by 37.9 per cent to $2 billion, driven by volume and price.
However, the report also showed the status of the import sector, highlighting how consumer good and intermediate goods drove imports.
“Imports of goods and services increased to $10, billion in the year ending March 2020 from over $10 billion in the year ending March 2019, largely driven by imports of intermediate and consumer goods. Much of the increase in imports of intermediate goods manifested in oil import bill, which accounted for about 20.8 per cent of goods import,” report reads.
Also, the importation of oil rose by 6.5 per cent which is equivalent to over $1 billion. Imports of goods and services amounted to $749.3 million in March 2020 compared with $823.1 million in the preceding month and $821.0 million in the corresponding month in 2019.
The edition noted that the decrease in import bill of goods manifested in oil imports as the available stock was adequate, together with a decline in prices in the world market.
Other portion of the economy
According to the report, the external sector of the economy is expected to experience challenges induced by COVID-19, particularly in 2020.
“Annual overall balance of payments improved to a surplus of $763.8 million in the year ending March 2020, compared to a deficit of $ 648.8 million in the corresponding period in 2019. “
However, on Tanzania’s the current account deficit improvement has been indicated, whereby $919.3 million has been recorded in the year ending March 2020 from a deficit of $1.6 billion in the year to March 2019.
Further, on month-to-month, the deficit was $ 30.8 million in March 2020 compared with $227.1 million in the corresponding period in 2019.
The central bank noted that “Nevertheless, in March 2020, services receipts, which includes earnings from tourism, declined by 26.4 per cent to $ 232.4 million, partly due to decline in tourist arrivals associated with measures adopted to limit the spread of COVID-19”
On the state of foreign reserves, the central bank’s report showed that gross official foreign reserves remained adequate, amounting to over $ 5.4million at the end of March 2020 from over $ 4.6 billion in the corresponding period in 2019.
“The reserves declined by $ 121.0 million from the end of February 2020 but was still sufficient to cover about 6.2 months of projected imports of goods and services, excluding foreign direct investment-related imports. Meanwhile, banks maintained a sizeable level of foreign assets, amounting to $ 1,022.1 million from $1,041.8 million in March 2019 and $1018.6 million in February 2020” read the report in part.