Tanzania Economic Outlook

  • Growth in real GDP is estimated at 7.2% in 2016 with the same rate projected for 2017, driven mainly by strong performance in industry, construction, services, and information and communication sectors.
  • Fiscal position has remained healthy and ongoing efforts by the government to improve revenue mobilisation as well as efficiency in public spending will help in maintaining the good performance.
  • While the level of industrialisation in Tanzania is low, the government’s mediumterm development programme is focused on nurturing industrialisation as a means of achieving economic transformation, and the government has demonstrated a strong commitment to implement the programme successfully.

The 2014 growth rate of 7% was maintained in 2015, with an improvement to an estimated rate of 7.2% in 2016. This record makes Tanzania one of the best performing and most stable economies in Africa. The major sources of growth were the services, industry, construction, and information and communication sectors. External development assistance was one of the main sources of finance for development projects. In the medium term, growth is projected to remain strong, driven by the same sectors. The fall in the international price of oil has had a positive impact, reducing the pump price of gasoline and industrial oil. This has also reduced the price of electricity, thereby boosting industrial production.

Growth is projected to stabilise at around 7% in the medium term as the performance of the major sectors are expected to remain stable and reinforced by increasing government investment in infrastructure. The availability of gas for electricity generation from the Mtwara pipeline, completed in 2015, will supply more regular and cheaper power to industries. Tanzania showed an enviable model of democracy with a peaceful national general election that led to the current government of President John Magufuli and members of the national parliament. The government has launched a five-year development programme that seeks to achieve full industrialisation of the country by 2025.

Tanzania ranks permanently among the top half of countries in Africa on governance. The major strengths of governance in Tanzania are in the areas of safety and rule of law, national security, participation, and human rights and gender; its major weaknesses are in human development (health and education) and infrastructure.

In terms of human development, Tanzania ranks 151 out of 188 countries with the Human Development Index (HDI) value of 0.521, as of 2014. This value is still low and positions the country in the low human development category. Caloric availability at the household level has hardly improved since 1997 and chronic malnutrition is estimated to be an underlying cause of over one third of the deaths of under-five year olds (Tanzania Human Development Report, 2014). A major challenge remains in the education sector, as the quality of education is low and characterised by an increasing number of dropouts as well as a lack of competencies and decline in morale and motivation of teachers.

After a long period of stagnation, the poverty headcount declined from 34.4% in 2007 to 28.2% in 2012, while extreme poverty fell from 11.7% to 9.7% (Household Budget Survey of 2011/12). The reduction in poverty appears more substantial if one uses the international poverty line of USD 1.90 per person per day. Based on this measure, the headcount ratio dropped from 59.9% to 48.8% between 2007 and 2012. The favourable performance in economic growth and poverty reduction was accompanied by narrowing inequality: the Gini index declined from around 0.39 to 0.36 between 2007 and 2012. Evidence on the shared prosperity indicator suggests that inequality reductions were mainly driven by a larger increase in the consumption accruing to the bottom quintiles. The government supports poor households through the Tanzania Social Action Fund (TASAF) Productive Social Safety Net Programme (PSSN), conditional cash transfers and public works programme. These programmes are expected to contribute to a reduction in the level of poverty in the medium term.