Tanzania’s exports have had a slower growth since the recovery from the shock caused by the COVID-19 pandemic. The country’s total merchandise exports had a slower growth since the recovery to USD 6.4 billion in 2021. Tanzania has a slightly diversified export profile and earnings from gold have decreased despite being above the medium-term average at USD 2.4 billion (approx. 37.0% of total exports) in 2021. Other top exports from Tanzania include copper and coffee. These exports contributed USD 913.5 million (approx. 14.3% of total exports). Tanzania’s export earnings from copper have continued increasing to USD 516.8 million in 2021; and earnings from coffee have continued increasing to USD 396.7 million in the same period. Tanzania’s trade deficit continued widening beyond the historical medium-term average of -USD 2.0 billion for 2018 to 2020, to -USD 3.0 billion in 2021.
Total merchandise export earnings have continued increasing which relieved the pressure caused by decreased net FDI inflows (foreign capital being invested domestically). Tanzania’s FDI inflows decreased to USD 921.8 million in 2021. Hence, Tanzania’s FDI stock has been seemingly unaffected by COVID-19 and continued increasing from an annual average of USD 15.4 billion for 2018, to 2020 to USD 17.2 billion in 2021. This bodes well for Tanzania as a country that is aiming to attract more foreign investment to diversify its economy away from the reliance on gold exports. This could also signifies expanding economic opportunities and relative economic openness towards foreign capital in the economy, which would signify some progress for the national economic diversification strategy.
Remittances receipts have begun recovering. Personal remittances received have begun recovering from COVID-19 from an annual average of USD 390.9 million for 2018 to 2020, to USD 569.4 million in 2021. Personal remittance payments to foreign nationals have continued moderating from an annual average of USD 91.1 million for 2018 to 2020, but Tanzania did not declare any remittance payments to foreign nationals in 2021. Tanzania has had net remittance inflows (net remittance receipts from the diaspora) which increased to approximately USD 561.0 million in 2021. This has affected the current account balance and strength of the TZS over the period.
The TZS has continued depreciating. In nominal terms, the TZS depreciated by an annual average of -2.4% against the USD for 2018 to 2020. The TZS depreciated by -3.1% to an annual average of TZS 2,298.9 per USD in 2021. Tanzania’s current account deficit continued widening beyond the historical medium-term average. In 2022, Tanzania’s current account deficit continued widening. In particular, Tanzania has benefited from the higher commodity prices which continued appreciating due to lower global supply following the sanctions against Russian exports after its military exercises in Ukraine. The global price of gold appreciated by 1.4% to USD 1,825.2 per oz in 2022 (2021: 1.7%; USD 1,799.8 per oz). This is also reflected in the projections for Tanzania’s current account balance.
In 2023, Tanzania’s current account deficit is projected to narrow despite being wider than the historical medium-term average to -USD 3.3 billion (approx. -3.9% of GDP). In the medium-term from 2024 to 2026, Tanzania’s current account deficit is projected to narrow, to an annual average of -USD 3.1 billion (approx. -3.0% of GDP). This illustrates a relatively stable and gradual improvement in the current account balance due to the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia. Nevertheless, gold prices are expected to remain stable as the global commodity for value-storage. Tanzanian authorities will have to take advantage of the current reprieve and invest in further diversification of the country’s exports away from the continued reliance on gold exports.
The issue of developing and diversifying the Tanzanian economy remains an elusive obstacle for the country. Tanzania still has a significant potential to grow its exports from copper and coffee. These represent the highest growth potential towards diversifying the Tanzania’s economy and export earnings. Apart from this, Tanzania should also deepen its integration in the COMESA, EAC and SADC regions to increase its intra-regional trade. This will provide an opportunity for Tanzania’s exports to compete against goods and services of comparable quality from the local regions. Moreover, Tanzania can offset the risks with its traditional export markets by increasing its dependence on the local regions for its exports.