Tanzania: Economic and Political Overview

Economic Indicators

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Tanzania has experienced strong growth in recent years, with an average growth of 6.3% in the last decade, thanks to a high level of exports in natural resources, developments in the tertiary sector (telecommunications, transportation, finance, tourism) and the establishment of a liberalisation programme. Although GDP growth decelerated since the outbreak of the COVID-19 pandemic, Tanzania was one of the rare economies not to fall into economic recession, thanks to gold exports and only light health restrictions. In 2021, the real GDP of the country grew by 4.9% reaching USD 70.28 billion according to the Bank of Tanzania; while in 2022 growth was estimated at 4.5% supported by public and private investment (mostly in infrastructure projects). For 2023, the IMF forecasts a GDP growth of 5.2%, followed by 6.2% in 2024, closer to the country’s pre-pandemic average. Downside risks include weak fiscal metrics, elevated debt stocks and the ongoing effects of the Russian-Ukraine war (the two countries accounted for 11% of tourist arrivals before the conflict).

In 2021-2022, the public deficit stayed elevated due to spending associated with the Socio-Economic Response and Recovery Plan. However, in 2022-2023, it is set to rise again due to social and development expenses. To alleviate the impact of inflation on consumers, the government has declared fuel and fertiliser subsidies. Additionally, healthcare spending related to COVID-19 will likely continue to be substantial until 2024. Despite the financing of infrastructure projects, the country’s debt-to-GDP ratio decreased marginally in 2022 (to 39.5%, from 40.7% one year earlier), and is expected to follow a downward trend over the forecast horizon, while debt service should increase. Concessional loans from multilateral and bilateral partners constitute approximately 71% of the overall public debt, while the remaining portion is primarily held domestically by commercial banks and pension funds. Foreign exchange reserves were estimated at 4.5 months of imports at end-June 2022. In 2022, inflation was driven to its highest level since 2017 by increasing the costs of imported goods and commodity prices, reaching 4%. Nonetheless, inflation remained below the central bank's 5% objective, and the elimination of the mobile money tax is expected to augment household purchasing power. The IMF forecast a rise in inflation in 2023 to 5.3% due to continued high energy and food prices. Tanzania’s priorities include enhancing social safety nets and improving transparency, public resource management and administration. The government has adopted an ambitious development plan (Tanzania Development Vision 2025) focused on supporting the private sector, industrialization and the creation of jobs. It aims to improve the business climate by upgrading infrastructure, facilitating access to finance and advancing the level of education. Zanzibar also revealed a five-year USD 2 billion plan to diversify away from the tourism industry (Focus Economics). Long-standing structural problems include mismanagement of public finances and an underdeveloped legal framework that undermines the effectiveness of regulation. In addition, the country remains heavily dependent on foreign aid, with almost a third of its budget coming from international aid.

The poverty rate, which was as high as 60% in 2007, was estimated at 26.4% as per the World Bank’s latest estimates. Poverty and income inequality remain high despite high economic growth. The country also has a high HIV/AIDS rate and many people lack access to basic services (water, electricity and healthcare). Additionally, the quality of primary health care has been negatively affected by a range of factors, including shortage and poor distribution of health workers, poor access to essential medicines and poor infrastructure. According to World Bank data, the unemployment rate was 2.5% in 2021 (latest data available), while the country’s GDP per capita (PPP) was estimated at USD 3,374 by the IMF (2022 data).

Main Sectors of Industry

Tanzania has a vast natural resource wealth, with significant reserves of gold, diamond, iron, coal, nickel, tanzanite, uranium, tin, phosphates, gemstones, and natural gas. Even though only about 14% of the land is arable, agriculture is the backbone of the Tanzanian economy: it employs around 65% of the workforce and accounts for 25.9% of the country's GDP, although the sector's contribution to the economy has been declining gradually (World Bank, latest data available). Tanzania's main crops are tobacco, coffee, cashew nuts, tea, cloves, cotton and sisal plant. Due to its diverse climatic and geographic zones, Tanzania has one of the widest crop varieties in Africa. Livestock production, especially cattle and sheep, is another important component of the primary sector. Agriculture is also a main source of exports; however, its real value has declined by up to 85% over the last 30 years. According to the latest data by the USDA, the 2022/23 season corn production is forecast at 5,900 thousand tonnes, that of sorghum at 750 thousand tonnes and that of rice at 2,300 thousand tonnes (-7%, +4% and +5% y-o-y, respectively).

Industry accounts for 29.3% of GDP and employs around 6% of the workforce. Manufacturing makes up more than half of the secondary sector, followed by processing (around 40%) and assembling industries (less than 5%). The manufacturing sector is largely centred on the processing of agricultural products and is estimated to account for 8% of GDP. Tanzania is rich in minerals such as gold, diamonds, tanzanite, and other precious stones. The mining sector is a significant contributor to the country's economy, accounting for approximately 4% of GDP. The construction sector has been progressively contributing to the national economy, with increasing infrastructure and real estate projects. Tanzania has vast potential for hydroelectric power and natural gas, which can be used to produce electricity. The energy sector is growing, and the government is investing in projects to increase the country's energy production. According to the latest data by the National Bureau of Statistics, in the first three quarters of 2022 industrial production grew by 5.1% at constant prices compared to the same period one year earlier.

Services account for 34.3% of GDP and employ 28% of the total workforce. Transport and storage, financial and insurance activities and information and communication are the fastest-growing sectors. Tourism is another important component of the tertiary sector as Tanzania has one of the richest and most diverse wildlife in Africa. It contributes to around 10% of the GDP and 10% of employment. Tourism and trade were particularly impacted by the Covid-19 pandemic; nevertheless, the country’s tourism receipts almost doubled to USD 2,560.7 million in 2022 from USD 1,310.3 million in 2021, consistent with the rise in the number of tourist arrivals (above 1.4 million compared to 922,692 the previous year – data Invest Tanzania). Moreover, the Tanzania National Business Council (TNBC) forecast that the share of tourism in the country’s GDP will reach 19.5% in 2025/26.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	65.1	6.5	28.4
Value Added (in % of GDP)	25.9	29.3	34.3
Value Added (Annual % Change)	3.5	6.5	3.0

Source: World Bank - Latest available data.

 

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Monetary Indicators	2016	2017	2018	2019	2020
Tanzanian Shilling (TZS) - Average Annual Exchange Rate For 1 MUR	61.25	64.64	66.71	64.80	58.31

Source: World Bank - Latest available data.

 

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:

61,3/100

World Rank:

93

Regional Rank:

8

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

 

Foreign Trade in Figures

Tanzania is open to foreign trade, which represents 31% of its GDP (World Bank, latest data available). The country's trade policy aims to create local industries that are more competitive and to diversify its export sector in order to stimulate economic growth. Tanzania is a member of several regional and international trade agreements, including the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the African Continental Free Trade Area (AfCFTA). The country has also implemented several measures to facilitate international trade, including the implementation of a single window system for trade documentation and the establishment of trade facilitation committees. In 2021, pearls, precious stones, and metals accounted for around 44.5% of Tanzania's exports, mainly due to gold exports, the main item in the Tanzanian trade balance (42.9% of total exports). Other major exports are rice (4.7%), vegetables (4.2%) and coffee (2.7%). Imports were led by petroleum oils (19.4%), medicaments (3.3%), iron (3.1%), and motorcars (2.2% - data Comtrade).

Tanzania's main suppliers are China (24.8% of total imports), the United Arab Emirates (12.5%), India (11.1%), Saudi Arabia (6.2%), and Japan (4.3%). Its main customers are the United Arab Emirates (16.5%), India (15.8%), South Africa (14.3% of total exports), Switzerland (8.2%), and Kenya (6.2% - data Comtrade 2021). Low customs duties (the trade-weighted tariff rate is 9.7%) and few trade restrictions make the country easily accessible for international trade. Trade barriers are mainly of a logistic and non-tariff nature. For example, increased traffic in and out of the Dar es Salaam port - the main port of entry and exit of merchandise for both Tanzania and its landlocked neighbouring countries (Uganda, Rwanda, Burundi and Zambia) - has not been followed up with the necessary infrastructural investments. This constitutes one of the main barriers to trade with these countries. Poorly maintained roads and railroads also make trade difficult. However, the government has launched a large number of projects to improve infrastructure. Obtaining construction permits, registering land, and tax payments remain difficult nonetheless.

Tanzania suffers from a chronic trade deficit due to a capital-intensive growth model highly demanding oil and capital goods imports. In 2021, merchandise exports reached USD 6.3 billion, while imports amounted to USD 10 billion (+5.4% and +27% y-o-y – data WTO); meanwhile, exports of services reached USD 3.2 billion, while imports amounted to USD 1.7 billion (WTO). In the same year, the World Bank estimated the country’s trade deficit at 2.7% of GDP (from 1% one year earlier). Data from the Bank of Tanzania show that in the first eleven months of 2022 exports of goods and services increased to USD 11.94 from USD 9.73 billion in the same period one year earlier. The increase was largely driven by non-traditional goods exports and services receipts (mostly tourism). On the other hand, imports of goods and services reached USD 16.45 billion, compared with USD 11.21 billion in 2021.

Sources of General Economic Information

Ministries

Ministry of Finance and Planning
Ministry of Investment, Industry and Trade
Ministry of Energy
Ministry of Natural Resources and Tourism

Statistical Office

National Bureau of Statistics

Central Bank

Central Bank of Tanzania

Stock Exchange

Dar es Salaam Stock Exchange

Search Engines

Tanserve - Search Engine and Directory

Economic Portals

Tanzania Development Gateway - Business Portal

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