Africa Report 05.09.2021

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The United Republic of TANZANIA : Economic Perspectives

Sharing its borders with 8 African countries, the United Republic of Tanzania is a parliamentary republic located in East Africa. The Republic was formed by unifying Mainland Tanzania, Tanganyika (a legacy of German East Africa (1885), that later became a British protectorate (1918), before obtaining its independence (1962)) with Zanzibar archipelago in 1964. In the 2000’s, the country’s 3rd President defined the development strategy “Vision 2025”, prioritizing the construction of infrastructure. This program resulted in the doubling of the annual growth rate since its implementation, averaging 6-7% a year over the last decade. The development of infrastructure aims to :
• Acquire the status of “middle income country”
• Provide its inhabitants with a decent standard of living
• Fight against corruption for a secure environment.
However, even if the poverty rate in the country has declined, because of the high population growth rate, the country remains a poor country. Find below the contribution of each sector to the Tanzanian economy :
• While it employs only 6.8% of the working population, the Secondary Sector contributes to 25.1% of GDP in 2019.
• The Tertiary Sector employs 27.9% of the working population and contributes to 37.5% in the breakdown of GDP.
• Though it employs up to 65.3% of the working population, the Primary Sector only contributes to 28.7% of GDP.

With more than 57 million inhabitants, the 6th most populous country in Africa, Tanzania is
the continent’s 10th richest country with a GDP of USD 57 Billion in 2018. Although the government is taking steps to expand access to social services like education, health and water, it remains very difficult as the population rises faster than the supply of the services.

On a Demographic point on view, this former British protectorate is populated by 57 million
inhabitants and more than 34% the population live in urban areas. The country is predominantly Christian (61%) and 35% of the population is Muslim. In Zanzibar, the share
of the Muslim population represents 99%. Population density is 64 inhabitants per km² with
life expectancy at birth of 63 years (SSA average is 60.5 years). On a Political point on view, In June 2015, John Pombe Magufuli was elected as the 5th President of Tanzania for a 5-year term. The fight against corruption is made a top priority by President Magufuli but at the cost of authoritarian governance, which has led to him being accused of violating human rights :
• Dismissal of nearly 10,000 civil servants with false diplomas
• Dar es Salam acquires an exclusively economic role
• In the new Capital, Dodoma, all members of the government and administrations are relocated.
On an Economical point of view, GDP growth was 7.0% in 2018, 0.2% higher than previous
year. Consumption, Investment and Net trade have been supported by lower consumption
tax collection and more control on public consumption expenditures. As for Investments, they remain positive but dampened by significant under-execution of “Vision 2025” strategy, by lower levels of FDI inflows in the country and a low private sector credit growth. Meanwhile, current balance deteriorated in 2018 with a 3.9% contraction of exports (% of GDP) and a 7.8% increase in imports (% of GDP).

Having minimized the dangerousness of the Covid-19 pandemic, Tanzania has not released
official figures for Covid-19 since April 29th, unlike its neighbors, the country hasn’t taken any specific action to combat the virus. On July 2020, President Magufuli once again asserted that the country has no coronavirus patients and called on foreign tourists to visit : “That’s why none of us wear masks here. Do you think we’re not afraid of dying? It’s because there is no Covid-19”, he said. Regardless of the President’s allegations, real GDP growth is projected to remain in the range of 5-6% over the medium term (favorable weather conditions, steady reforms to improve the business environment…). Inflation would remain low (favorable food supplies and stable global energy prices). Fiscal deficit targeted at a deficit of 2.3% is expected to expand to 3-4% of GDP. Imports of capital goods to support the “Vision 2025” strategy will widen the current account deficit.
Tanzania is one of the rarest African country with a positive GDP expected growth despite the crisis for the future years.

In 2018, Tanzania was the 80th economy in the world in terms of GDP (current USD) (106th in the total exports and 98th in total imports). The country exported USD 5.78 Billion and imported USD 10.9 Billion, resulting in a negative trade balance of USD -5.08 Billion. The top exports of Tanzania are Gold ($892M), Raw Tobacco ($333M), Raw Copper ($231M) and other furniture ($147M). The top imports are Refined Petroleum ($1.77B), Palm Oil ($280M), Packaged Medicaments ($220M), Cars ($191M) and Wheat ($182M).

National currency : the national currency is the Tanzanian Shilling (TZS) issued and managed by the Central Bank of Tanzania. The value of the TZS is determined by the forex markets as it is a free-floating currency : 1 shilling is composed of 100 senti, banknotes and coins in circulation from 500 up to 10,000 shilling. Find on the right the evolution of TZS, as of Sep 29th, 2020, USD 1 is TZS 2,315 / €1 is TZS 2,713

Central bank
The Central Bank of Tanzania’s main mission is to maintain price stability of the financial
system for inclusive economic growth. Its targets growth rate of money supply. Deposit rates offered by banks and lending rates were on a downward movement with varying
magnitude, reflecting the impact of accommodative monetary policy measures by the Central Bank, enabling the Central Bank to maintain the required level of gross official reserves sufficient to cover at least 4 months of imports of Goods and services. Find below the graph representing selected Banks’ Interest Rates : for 2018/19 12-month deposit rate are at 8.5% and short-term lending rate at 17.5%.

 

Written on 29/09/2020

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