- Tanzania is significantly scaling up regional integration through cross-border trade.
- The East African country is also banking on a rebound in the tourism industry with receipts doubling to $2.7 billion in February 2023.
- Overall the number of investments powering Tanzania economy increased by 128 percent by February 2023.
Tanzania is poised to emerge as a premier investment destination not only in East Africa but across the entire continent, driven by its robust economic growth. The recent International Monetary Fund (IMF) report underscores this positive trajectory, indicating that the nation’s GDP is expected to grow from the current 5.2 per cent to an impressive 6.1 per cent next year.
Remarkably, Tanzania’s economy is resilient, overcoming the challenges posed by the global COVID-19 pandemic that hindered growth in various regions. The World Bank’s economic overview for Tanzania reflects a notable GDP growth rate of 4.6 per cent in 2022, with expectations of a further increase to 5.1 per cent in 2023.
This growth is attributed to the strategic implementation of structural reforms aimed at enhancing the competitiveness of the economy, fostering an improved business and investment environment, and reducing the costs associated with regulatory compliance.
Despite challenges, Tanzania economy has positive outlook
According to the World Bank report, Tanzania’s growth trajectory is anticipated to reach its long-term potential of approximately 6 per cent by 2025. This positive outlook signals a resilient and thriving economy that continues to evolve despite external challenges.
While the Tanzanian shilling has experienced a significant and unprecedented decline against the US dollar over the past three months, resulting in increased spending on imports and foreign products by Tanzanians, the government remains confident in its ability to implement effective countermeasures.
However, a comprehensive analysis is crucial when examining Tanzania’s growth, particularly concerning factors that influence human development. Understanding the multifaceted aspects of this economic expansion will contribute to a more nuanced perspective on Tanzania’s journey toward becoming a thriving investment hub in East Africa and beyond.
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Per capita income on a positive trajectory
In October 2023, the Bank of Tanzania (BoT) released statistics indicating a notable five percent increase in Tanzania’s per capita income over the past year. This surge is attributed to rapid economic growth observed in Dar es Salaam and the Lake and Northern Zones.
According to the central bank report, the per capita income for each zone experienced a positive trajectory, rising from $1,080 (TSh2.70 million) in 2022 to $1,136 (TSh2.84 million). Delving into specifics, the report highlighted that the average income of residents in Dar es Salaam exhibited a more substantial increase compared to other parts of the country, climbing from $1,925 to $2,157 in 2022.
The report noted, “All zones had per capita growth except for the central and southeastern zones. This situation is largely due to a significant increase in the population in those areas. Dar es Salaam and the Northern and Southern Highlands zones had per capita incomes that surpassed the national standards.”
The journey leading to this current figure has been a gradual one. In 2019, former Minister of Finance and Planning, Phillipo Mpango, shared insights into the national economy during a parliamentary session. He disclosed that the per capita GDP had grown by 4.4 per cent in 2018, reaching $1,044 compared to $930 in 2017.
Dr. Mpango noted, “The amount is equivalent to a per capita GDP of $982 in 2018, up from $930 in 2017,” unveiling these figures during the presentation of the national budget for the financial year 2019/2020. The recent statistics from the Bank of Tanzania further affirm Tanzania’s sustained economic progress, particularly in key regions, contributing to the overall enhancement of per capita income.
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Growth to middle-income status
When the news broke on July 1, 2020, that the World Bank had officially categorized Tanzania as a lower-middle-income country, it underscored the nation’s commitment to economic progress. Over the past 15 years, the country has dedicated significant efforts to elevate its key drivers of Tanzania economy, including agriculture, mining, tourism, and manufacturing.
The World Bank identified Tanzania economy as one of seven nations moving to a higher income category during that month, contrasting with three other nations that experienced a downgrade in the year 2019. Professor Delphin Rwegasira from the University of Dar es Salaam’s Economics Department highlighted this positive shift, emphasizing its implications for poverty reduction and characterizing it as a pivotal step forward in the country’s development.
Prof. Rwegasira further stressed the creditworthiness boost associated with moving into the lower-middle-income status, citing its positive impact on Tanzania’s ambitious growth plans. Despite mixed sentiments among the nation’s economists, including concerns about the need for a more inclusive Tanzania economy, Dr. Abel Kinyondo, a lecturer at the University of Dar es Salaam, urged attention to addressing the wealth gap.
The World Bank’s report acknowledged the performance of Tanzania economy, forecasting a growth rate reaching the long-run potential of about 6 per cent by 2025. The report highlighted the country’s lower headline inflation compared to regional economies, attributing the decline from 4.4 per cent in June 2022 to 3.3 per cent in July 2023 to factors such as global commodity price easing, government subsidies on fuel and fertilizer, and stability of the Tanzanian shilling against the US dollar.
However, the report also pointed out that economic growth has been concentrated in sectors with relatively fewer workers from low-income households, resulting in a limited impact on poverty reduction. While no significant change in the poverty rate is expected in 2023, the prospects for poverty reduction in Tanzania are cautiously optimistic as economic recovery continues.
Tanzania economy fastest growing in East Africa
On a broader regional scale, the International Monetary Fund (IMF) expresses confidence in Tanzania’s economic growth, projecting it to be the second-fastest-growing economy in East Africa, behind Rwanda, which is expected to post a 7.1 percent growth rate. The pro-investment approach and strategies implemented by President Samia Suluhu Hassan’s administration are translating into a tangible reality, especially for supporters of business and industrialization.
Elijah Mwandumbya, the Finance Deputy Permanent Secretary (Economic Management), highlighted significant changes in the country over the last two years that have propelled economic expansion, particularly in agriculture and business activities. The government’s provision of agricultural subsidies has enabled farmers to expand cultivated areas, contributing to the overall economic growth.
In summary, Tanzania’s economic trajectory, marked by international recognition and positive forecasts, reflects a nation on the path to sustained development. The government’s focus on economic diversification, poverty reduction, and pro-investment policies is fostering an environment ripe with opportunities, encouraging Tanzanians to seize the available prospects. As evidenced by the recently tabled national budget, which outlines crucial plans, including the expansion of tax revenue, Tanzania is poised for continued economic growth in the coming years.
