Tanzania Economic Outlook
- Real GDP growth remains strong in spite of continuing economic problems in the Eurozone and recurrent domestic power shortages.
- The government has to maintain tight fiscal and monetary policies to contain inflation and to reduce dependence on aid.
- Youth unemployment, at 8.8%, disproportionately affects women and young people in rural areas.
Tanzania’s economy showed resilience to shocks and is expected to remain buoyant, with its Gross Domestic Product (GDP) growing in 2012 and 2013, well above the regionalaverages. Services, industry and construction continue to be the driving forces but frequent power cuts continue to damage output potential. Exports, which received a boost during the crisis as demand for gold in world markets continued to rise, are expected to perform well, with growth forecast at 10.9% and 9.7% in 2012 and 2013.
Overall recurrent spending has outpaced revenues and grant financing, contributing to growing fiscal deficits and higher public debt. The budget deficit shrank in 2011 and isexpected to stabilise in the next two years. Tanzania’s inflation rate is expected to ease in 2012 and 2013, after having jumped well above its target last year and into double digits as a result of higher food prices. The Tanzania shilling (TZS) has been under pressure since 2010, falling by 10.6% in 2011 and making imports more expensive. Increased oil imports for power generation are driving strong demand for foreign currency.
Unemployment is a concern with nearly 2.4 million people — most of them young — out of work, representing 10.7% of the population. The employment situation of the urban young, in particular, is critical. Lack of sufficient job opportunities for young women, who have increasingly been participating in the labour market, further complicates the situation. The effects of the current global crisis could create additional challenges, in particular with respect to tourism and export-oriented sectors.
