Tanzania Economic Outlook

  • The economy grew by 7% in 2014 and estimates suggest the same growth rate in 2015, mainly driven by the services, industry, construction, and information and communication sectors. The fiscal position was healthy with an overall deficit of 3.4% of GDP in 2013/14. Similar prospects are expected over the medium term.
  • Successful and peaceful general elections in October 2015 transferred power to a new president who has committed to prudent resource management, fighting corruption and pursuing inclusive growth.
  • There is a growing rate of urbanisation with associated unemployment, pressure on infrastructure and overstretched government capacity to manage urban development.

Economic performance has remained stable and strong over the past decade. There was 7% growth in 2014 and preliminary estimates indicate the same growth rate in 2015, driven mainly by the services, industry, construction, and information and communication sectors, each of which grew in double digits. For the medium term, growth is projected to outperform the records of 2014 and 2015, increasing to 7.2%. While other sectors are expected to at least perform at their recent levels, higher growth performance is expected largely from increased industrial activities and investment in infrastructure. The inflation rate in 2014 was 6.1%, and is expected to further reduce to 5.6% in 2015 due to favourable weather conditions that led to a sustained level of agricultural output and prudent fiscal and monetary policy management. The government’s total debt is sustainable at 30.2% of GDP in 2014/15.

On social and human development, there has been an improvement in Tanzania’s Human Development Index value from 0.371 to 0.521 between 1985 and 2014. Between 1980 and 2014, life expectancy at birth increased by 14.5 years, expected years of schooling increased by 3.3 years and infant mortality declined from 68 deaths per 1 000 live births in 2005 to 41 in 2012/13. However, a major area of weakness is poverty reduction where, due to the structure of the Tanzanian economy, high economic growth has not been reflected in a proportional reduction in poverty levels. While the average growth rate has been about 7%, the agriculture sector that employs about 70% of workers has been growing at less than 4%. The latest household budget survey (2011/12) revealed that 28.2% of Tanzanians are poor, with a higher incidence of poverty in rural areas.

The general election of October 2015 led to the emergence of Dr. John Magufuli as the president of the United Republic of Tanzania, with a five-year mandate. The president has unveiled a comprehensive five-year work plan that focuses on addressing land ownership, water, health services, education, agriculture, electricity and justice delivery issues. The plan also focuses on government effectiveness and efficiency, increasing government revenue and combating corruption. Faithful implementation of policies and programmes in these areas outlined by the president will be crucial in addressing Tanzania’s poverty problem in the medium term.

Urbanisation has become a major development challenge in Tanzania. In the city of Dar-es-Salaam and other major cities, unemployment is higher than in the rural areas, basic infrastructure (roads, electricity, water, bus transit, etc.) have become highly insufficient to meet the demands of users and there is inadequate provision of recreational facilities, sewage systems, water drainage channels and environmental protection. Planned residential areas are rare, although land itself is in abundance. Intra-city transportation presents a serious challenge to commuters due to poor road networks and the absence of intra-city mass rail transport systems. A comprehensive and co-ordinated “Urban Development and Management Policy” is under preparation and success in finalising and implementing the policy will be a big achievement for the new government.