Tanzania has sustained relatively high economic growth over the last decade, averaging 6–7% a year. While the poverty rate in the country has declined, the absolute number of poor citizens has not because of the high population growth rate. The country’s overall population is about 55 million (2016).

Economic Overview

Economic performance in 2018 was mixed, while inflation remains low and stable. The National Bureau of Statistics did not release any quarterly gross domestic product (GDP) data for 2018, pending completion of a rebasing exercise. However, available data suggest signs of softening of the growth momentum. Foreign direct investment has declined from high levels five years ago (about 5% of GDP in 2014), and export growth has stagnated. The current account deficit has increased to 4.4% of GDP in the year ending in December 2018, from 2.9% in the preceding 12 months. Non-performing loans have declined recently to 9.7% in September 2018 from 12.5% in September 2017 but remain almost double the 5% statutory threshold. On the positive side, inflation has remained low and stable at 3% in January 2019. Credit to the private sector has edged upward, reaching 4.9% in the 12 months ending September 2018. Gross official reserves remain high at $5 billion in December 2018, equivalent to 4.9 months of projected import of goods and services, and the shilling has remained relatively stable.

The fiscal deficit remains low, not counting payment arrears and delayed refunds of value-added tax. The 2017/18 budget deficit after grants of 1.3% of GDP suggests effective spending management but does not factor in payment arrears, with an estimated stock of over 3% of GDP. The government is paying down roughly TZS 1 trillion of verified arrears per fiscal year. The low deficit is the result of controlled recurrent expenditures and under execution of the development budget by more than 40%. Contributing factors include shortfalls in domestic revenue and external financing for large projects. Public debt is currently sustainable, but there is need for the Government to consider cost-effective financing options and manage associated risks to support public investments. The 2018/19 budget targets public investments to consume 45% of total spending, equivalent to 9.1% of GDP compared to 5.5 a year prior.

Source: World Bank