Economic Outline

Economic Indicators

Tanzania has achieved remarkable progress in economic growth over the past two decades, with an average annual GDP growth rate surpassing 5%, thanks to a high level of exports in natural resources, developments in the tertiary sector (telecommunications, transportation, finance, tourism), and the establishment of a liberalization program. Fitch forecasts real GDP growth to increase to 5.0% in 2023 and 5.5% in 2024, up from 4.7% in 2022, driven by heightened activity in agriculture, mining, and tourism, along with infrastructure investments. Over the long term, growth will further benefit from the development of offshore gas fields and LNG production.

In the first half of 2023, external pressures escalated due to reduced FX inflows, a higher import bill, debt amortization, and a tightly managed exchange rate, leading to FX shortages and a premium exceeding 10% of the official exchange rate. The government anticipates the FY24 budget to achieve its 2.8% of GDP target, down from 4.3% in FY23, through revenue mobilization measures and spending controls. However, Fitch projects the FY24 deficit to slightly surpass the target, reaching 3.1% of GDP. Central government debt/GDP remains moderate (45% of GDP in FY23), with a projected moderate increase to 46.4% in FY25. The significant portion of concessional debt supports debt sustainability, with nearly two-thirds of public debt denominated in foreign currency, of which 70% is concessional, as of end-FY23. Inflation is projected to stay within the Bank of Tanzania's (BoT) 3%-5% target range in 2023-2024, aided by lower food inflation due to fertilizer subsidies. However, the proposed increase in public sector wages in FY24 could exert upward pressure on inflation. Tanzania's three-year Extended Credit Facility (ECF) Arrangement, with total access of SDR 795.58 million (equivalent to about USD 1,046.4 million), was approved on July 18, 2022. The arrangement is geared towards supporting economic recovery, maintaining macro-financial stability, and fostering sustainable and inclusive growth. Key reforms focus on bolstering fiscal space for essential social spending and productive public investment, improving the monetary policy framework and financial sector oversight, and advancing structural reforms. Tanzania’s priorities include enhancing social safety nets and improving transparency, public resource management and administration. The government has adopted an ambitious development plan (Tanzania Development Vision 2025) focused on supporting the private sector, industrialization, and the creation of jobs. It aims to improve the business climate by upgrading infrastructure, facilitating access to finance, and advancing the level of education. Zanzibar also revealed a five-year USD 2 billion plan to diversify away from the tourism industry (Focus Economics).

The poverty rate, which was as high as 60% in 2007, was estimated at 26.4% as per the World Bank’s latest estimates. Poverty and income inequality remain high despite high economic growth. The country also has a high HIV/AIDS rate and many people lack access to basic services (water, electricity, and healthcare). Additionally, the quality of primary health care has been negatively affected by a range of factors, including a shortage and poor distribution of health workers, poor access to essential medicines, and poor infrastructure. According to World Bank data, the unemployment rate was 2.6% in 2022 (latest data available), while the country’s GDP per capita (PPP) was estimated at USD 3,099.

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