| Imagery Source: The Blue Diamond Gallery |
| Information Source: African Development Bank |
| Recent macroeconomic and financial developments |
| Real GDP grew 5.3% in 2023, up from 4.7% in 2022, driven by agriculture, construction, and manufacturing on the supply side and private investments on the demand side. Tight monetary policy, together with moderation in food and energy prices, helped reduce inflation from 4.3% in 2022 to 3.8% in 2023. The Tanzanian shilling depreciated by 8% in 2023, reflecting shortages of foreign exchange. |
| The fiscal deficit declined slightly from 3.6% of GDP in 2021/22 to 3.5% in 2022/23, responding to expenditure controls, and was financed by external and domestic borrowing. Public debt increased from 43.6% of GDP in 2021/22 to 45.5% in 2022/23 due to an increase in loans. The current account deficit narrowed from 7.3% of GDP in 2022 to 3.8% in 2023, benefiting from higher tourism receipts, and was financed by external commercial debt and official flows. Reserves declined from 4.7 months of import cover in 2022 to 4.5 months in 2023, explained by the authorities’ response to the foreign exchange shortage. The banking sector, which accounts for 71% of financial assets, remained sound with the ratio of nonperforming loans to gross loans declining from 5.7% in 2022 to 4.3% in 2023, below the regulatory requirement of 5%. |
| The 2017/18 Household Budget Survey reported a decline in poverty from 28.2% in 2011/12 to 26.4% in 2017/18, although recent assessments by United Nations agencies estimate that poverty increased from 26.1% in 2019 to 27.7% in 2020 due to COVID-19. The 2021/22 Integrated Labour Force Survey revealed a decline in unemployment from 10.5% in 2014 to 9.3% in 2021/22. |
| Outlook and risks |
| Real GDP growth is projected at 5.7% in 2024 and 6% in 2025, driven by agriculture, manufacturing, and tourism and supported by public investments and reforms to improve the business environment. Inflation is projected to decline to 3.3% in 2024 and 3.4% in 2025, helped by stability in food and energy prices. The fiscal deficit, financed by domestic and external borrowing, is expected to decline to 2.5% of GDP in 2023/24 and stabilise at that level in 2024/25, supported by improvements in revenue performance. The current account deficit, financed by external borrowing, is projected at 4.0% of GDP in 2024 and 4.2% in 2025, supported by merchandise exports and tourism receipts. The major downside risks to the outlook include spillovers from geopolitical tensions and regional conflicts, sluggish global growth, the narrow tax base, and climate shocks. |
| Reform of the global financial architecture |
| Structural transformation in Tanzania has been slow and constrained by several challenges, including declining industrial productivity and competitiveness and shallow financial markets. Agriculture’s share in employment declined from 84.8% in the early 1990s to 65% in 2022, while industry’s share rose from 2.6% to 6.8% and services’ share rose from 12.6% to 29%. Agriculture’s share in GDP dropped from 42% in the early 1990s to 26% in 2022. Manufacturing’s share in GDP has remained unchanged at around 8% since the mid-1990s, and its share in total exports has remained below 25%. The slow pace of structural transformation is holding back labour productivity growth. |
| Actions to expedite structural transformation include adjusting the regulatory framework to improve the business environment and boost investments in manufacturing; addressing infrastructure bottlenecks, especially in energy and transport; and investing in human capital. Financing Tanzania’s structural transformation requires deepening financial markets through digital financial solutions; increasing domestic revenue mobilisation, notably by expanding the tax base; and strengthening capacities for negotiation of natural resources contracts. Reforms of the global financial architecture to increase access to concessional, low-cost, and long-term development and climate financing would be most beneficial to Tanzania. |
| For the full document, click the link below |
| Tanzania: Economic Outlook and GDP |
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