Tanzania flag Tanzania: Economic and Political Overview

The economic context of Tanzania

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.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 74.1379.4579.6186.1393.74
GDP (Constant Prices, Annual % Change) 4.75.05.56.06.3
GDP per Capita (USD) 1,2051,2541,2201,2821,355
General Government Gross Debt (in % of GDP) 44.946.346.144.443.0
Inflation Rate (%) 4.44.04.04.04.0
Current Account (billions USD) -4.14-4.21-3.33-3.07-2.90
Current Account (in % of GDP) -5.6-5.3-4.2-3.6-3.1

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Tanzania has a vast natural resource wealth, with significant reserves of gold, diamond, iron, coal, nickel, tanzanite, uranium, tin, phosphates, gemstones, and natural gas. Even though only about 15.2% of the land is arable, agriculture is the backbone of the Tanzanian economy: it employs around two-thirds of the workforce and accounts for 24.6% of the country's GDP, although the sector's contribution to the economy has been declining gradually (World Bank, latest data available). Tanzania's main crops are tobacco, coffee, cashew nuts, tea, cloves, cotton, and sisal plant. Due to its diverse climatic and geographic zones, Tanzania has one of the widest crop varieties in Africa. Livestock production, especially cattle and sheep, is another important component of the primary sector. Agriculture is also a main source of exports; however, its real value has declined by up to 85% over the last 30 years.

Industry accounts for 27.7% of GDP and employs around 8% of the workforce. Manufacturing makes up more than half of the secondary sector, followed by processing (around 40%) and assembling industries (less than 5%). The manufacturing sector is largely centred on the processing of agricultural products and is estimated to account for 8% of GDP. Tanzania is rich in minerals such as gold, diamonds, tanzanite, and other precious stones. The mining sector is a significant contributor to the country's economy, accounting for approximately 4% of GDP. The construction sector has been progressively contributing to the national economy, with increasing infrastructure and real estate projects. Tanzania has vast potential for hydroelectric power and natural gas, which can be used to produce electricity. The energy sector is growing, and the government is investing in projects to increase the country's energy production. According to the latest data by the National Bureau of Statistics, in the first three quarters of 2023, industrial production decreased by 5% at constant prices compared to the same period one year earlier.

Services account for 30.7% of GDP and employ 26% of the total workforce. Transport and storage, financial and insurance activities, and information and communication are the fastest-growing sectors. Tourism is another important component of the tertiary sector as Tanzania has one of the richest and most diverse wildlife in Africa. It contributes to around 10% of the GDP and 10% of employment. Tourism and trade were particularly impacted by the Covid-19 pandemic; nevertheless, Tanzania has received over 1.8 million tourists between 2021 and 2023, earning revenue of about USD 3.37 billion (official governmental figures). Moreover, the Tanzania National Business Council (TNBC) forecast that the share of tourism in the country’s GDP will reach 19.5% in 2025/26. As of March 2024, Tanzania has a total of 48 licensed banks, comprising 35 commercial banks, 5 community banks, 4 microfinance banks, 2 mortgage banks, and 2 development banks. Their combined total assets surged by 17.3% to TZS 46,159.5 billion in 2022 from TZS 39,346.3 billion in 2021 (data Invest Tanzania).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 64.3 7.2 28.5
Value Added (in % of GDP) 24.3 27.7 30.6
Value Added (Annual % Change) 3.3 4.3 5.5

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
61,3/100
World Rank:
93
Regional Rank:
8

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

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Latest Update: May 2024

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