PESA
PESA Editorial on Tanzania: 1H2022/23

PESA Editorial on Tanzania: 1H2022/23

Tanzania’s economy has recovered from the shock caused by the COVID-19 pandemic. Real GDP growth is projected to decrease from an annual average of 5.6% for 2019 to 2021, to 4.8% in 2022. Inflation is projected to increase from an annual average of 3.5% for 2019 to 2021, to 4.4% in 2022. The elevated inflation is caused by the sanctions against Russia which have increased the price of crucial imports. In the medium-term period from 2023 to 2025, real GDP growth is projected to increase to an annual average of 5.7%. Meanwhile, inflation is projected to increase to an average of 4.7% over the medium-term from 2023 to 2025.

PESA Editorial on Tanzania: 1H2022/23
PESA Editorial on Tanzania: 1H2022/23

The Government of Tanzania’s debt has begun moderating after increasing in 2020. Tanzania’s gross public debt is projected to decrease from an annual average of 40.1% of GDP for 2019 to 2021, to 39.8% of GDP in 2022. The decrease in public debt is largely due to robust economic growth and the Government of Tanzania implementing countercyclical fiscal austerity as the economy recovers from the shock caused by the global lockdown response to the COVID-19 pandemic. The fiscal deficit is projected to widen from an annual average of -2.6% of GDP for 2019 to 2021, to -3.3% in 2022. This shows the countercyclical fiscal stance taken by the government despite spending and further borrowing outpace revenue growth. In the medium-term period from 2023 to 2025, the fiscal deficit is projected to narrow to an annual average of -2.5% of GDP. Therefore, public debt is projected to decrease to an average of 37.8% of GDP over the medium-term from 2023 to 2025.

PESA Editorial on Tanzania: 1H2022/23
PESA Editorial on Tanzania: 1H2022/23

Tanzania’s external sector was not negatively affected by the COVID-19 pandemic in 2020 but the sector has begun deteriorating due to the rebound in aggregate demand raising demand for imports; and the sanctions against Russia which have raised the price of imports. Tanzania’s current account deficit is projected to widen from an annual average of -USD 1.7 billion (approx. -2.6% of GDP) for 2019 to 2021, to -USD 3.3 billion (approx. -4.3% of GDP) in 2022. In the medium-term period from 2023 to 2025, the current account deficit is projected to narrow to an annual average of -USD 2.9 billion (approx. -3.1% of GDP). This illustrates a short-lived deterioration in the current account balance due to the impact of sanctions against Russia on import prices. However, Tanzanian authorities will have to take a proactive approach to macroeconomic management given the uncertainty of how long the conflict and sanctions will last. The impact of the Russia-Ukraine conflict on capital markets, specifically the withdrawal of capital from emerging markets, will also become a major concern for the balance of payment and the TZS exchange rate.

PESA Editorial on Tanzania: 1H2022/23
PESA Editorial on Tanzania: 1H2022/23

Tanzania is scheduled to hold its national elections in 2025 and the election campaigning cycle is still a long way ahead. Incumbent President H.E. Samia Suluhu Hassan may be vying for a second term in office using her empowerment and international re-engagement rhetoric. The current political climate remains relatively calm despite pressures political reforms that were suppressed by former President John Pombe Joseph Magufuli. President H.E. Samia Suluhu Hassan will continue her campaign on international re-engagement in order to attract foreign investment into Tanzania.


Siyaduma Biniza

Siya is the Executive Director at PESA.

Siyaduma Biniza

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