Tanzania Economic Outlook

Economic performance and outlook

Economic growth has slowed since the last quarter of 2016, following real GDP growth of at least 7% between 2013 and 2016. Growth in the first two quarters of 2017 averaged 6.8% and was estimated at 6.5% for the full year. Construction, mining, transport, and communications were key growth drivers in 2017. Growth is projected to remain robust at 6.7% in 2018 and 6.9% in 2019, representing one of the best performances in East Africa. A tightening trade deficit, with a drop in imports outweighing a decline in exports, is likely to support growth. Public investment, particularly with ongoing implementation of larger infrastructure projects, is expected to boost growth in 2017 and beyond. However, uncertainty in the business environment, combined with stalling private-sector credit growth, could hinder private-sector investment.

Macroeconomic evolution

Lower than expected revenues in 2016 and 2017 led to a higher fiscal deficit than expected, 3.7% of GDP in 2016 and 2.1% in 2017. Government expenditure was 20.7% below its target, although 8.4% above the previous fiscal year. The fiscal deficit is projected to expand slightly in 2018, to 4.4% of GDP. Although public debt levels are sustainable, debt service costs increased considerably in recent years, which could reduce fiscal space. Inflation was well contained at 5.3% in September 2017 and is projected to remain around 5% through 2019. The Bank of Tanzania loosened monetary policy in 2017 to address liquidity constraints and support credit growth, after private-sector credit growth fell from 24.8% in 2015 to 7.2% in 2016 and to 0.3% in August 2017.


General macroeconomic stability continues to support growth. The government has made considerable efforts to contain recurrent expenditure and inefficient spending, including reducing the public-sector payroll and nonpriority spending while increasing development spending, particularly for infrastructure, to support medium-term growth. The government also increased efforts to improve tax revenue administration by driving out corruption and tackling tax evasion in a bid to increase the fiscal space. The Bank of Tanzania also loosened monetary policy in 2017 to support credit expansion, although this has yet to offset reduced private-sector lending.


The economy is vulnerable to considerable downside risks. Uncertainty in the business environment following changes in policies, regulations, and tax administration could weigh on private sentiment and slow growth and investment, particularly in the mining sector. Credit growth stalled, while nonperforming loans rose to more than 10%, which could further hinder private investment. Although government development spending has increased considerably over the past two years, slow implementation of public infrastructure projects could limit growth. Moreover, overly ambitious revenue projections in national budgets could increase already high arrears and damage budget credibility. Current debt levels are considered sustainable, but effective measures to continually monitor debt service costs and ensure appropriate financing will support longterm fiscal sustainability.

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