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Growth to Decline in Tanzania as Coronavirus Hurts Tourism Sector

Growth to Decline in Tanzania as Coronavirus Hurts Tourism Sector

The African Development Bank Group (AfDB) described the Tanzanian economy as a market diversified economy, characterized by a robust private sector consumption, substantial public spending, strong investment growth, and an upturn in exports that underpinned its positive outlook. Tourism, mining, services, construction, agriculture and manufacturing are significant sectors of the economy.

Real GDP growth was at 6.8% in 2019, a decline from 7% in 2018. Prior to the outbreak of the coronavirus, the AfDB said that Tanzania’s economic growth was expected to be around 6.4% in 2020 and 6.6% in 2021. These projections according to the Bank are attainable only in the presence of favourable weather, prudent fiscal management, mitigation of financial sector vulnerabilities, and implementation of reforms to improve the business environment.

The World Bank earlier indicated that Tanzanian’s economy will grow 5.8% in 2020 compared with an estimated 5.6% in 2019 and it’s expected to increase to 6.1% in 2021. However, due to the outbreak of the coronavirus, the world bank on Monday, June 8 revised the growth rate for Tanzania. According to the Bank, growth is expected to drop to 2.5% in 2020 from 6.9% in 2019.

The Bank said,

“international travel bans and caution against contracting the virus have severely hurt the tourism sector, which had been one of the fastest-growing sectors in the economy.”

Tourism is the fastest growing economic sector in Tanzania and very essential for local socio-economic stability. However, due to the outbreak of the coronavirus, the tourism sector is fastest to decline by 80% or more this year.

The direct and indirect contribution of tourism was 14 percent of Tanzania’s GDP in 2014 with USD 6.7bn. This is expected to increase by 6.6% annually in the next 10 years, according to the World Travel and Tourism Council (WTTC). Tanzania’s tourism sector generated 12 percent of the country’s total employment (over 1m jobs) and directly contributes to 4.3% of total employment, according tanzaniainvest.com.  

Tourism in Tanzania can be broadly divided into wildlife and beach.  According to the tanzaniainvest, there are 16 national parks in Tanzania, 28 Game Reserves, 44 Game controlled areas, 1 conservation area and 2 marine parks. Some of Africa’s most renowned tourist destinations such as Serengeti plains, the Ngorongoro Crater, lake Manyara, Selous game reserve, Zanzibar archipelago white sandy beach and Mount Kilimanjaro are found in Tanzania.

However, an assessment of Tanzania's tourism industry after the outbreak of the COVID-19 pandemic has shown that the number of tourists visiting the country will drop from an estimated 1, 867, 000 to 437,000 annually, said, Hamisi Kigwangalla, the Minister for Natural Resources and Tourism. He said the drop in tourist arrivals followed the suspension of international flights from America, Europe and Asia in the wake of the pandemic. Kigwangalla, further indicated that the assessment also showed that the earnings from the tourism sector were expected to drop dramatically this year due to the pandemic. He added that as a result of the COVID-19 crisis, direct employment in the tourism sector will go down from 623,000 jobs to 146,000 jobs.

On March 20, Tanzania’s authorities announced the shutting down of all tourist hotels and a ban on all tourist flights as a protective mechanism against the COVID-19 pandemic. The Minister of Information, Tourism and Heritage, Mahmoud Thabit Kombo said on Saturday June 6, in an interview with Nyawira Mwangi of CGTN AFRICA that

“Zanzibar today has opened its tourism activities to normal both for charter flights and scheduled flights”.

Tanzania has put in place several strategies to help market its tourism abroad. These include organizing campaigns to market various tourist destinations available in the country, which was being conducted in Moscow, Russia.

In November 2018, Tanzania won the Award for the "Best Destination to the World" in the Category of Exotic Destination 2018. Tanzania won the Award for the third time since 2011, where Zanzibar was chosen as the Best Beach Tourist Destination in Africa and awarded the Star Travel Award. In 2017, Tanzania also received a National Geographical Travel Award as the second-best destination in the world in the category of exotic destination.

IMF Approves $14.3 Million in Debt Relief for Tanzania

The devastating effect of COVID-19 on the Tanzanian economy, especially on the tourism sector has forced the government of Tanzania to seek debt relief from the IMF. Debt relief at this time is timely since that will give the country some ample time to get the economy back on track.

The International Monetary Fund approved a $14.3 million grant under its Catastrophe Containment and Relief Trust to cover Tanzania’s debt repayments falling due to the IMF from June 12 to October 13, Blomberg reports.

The pandemic has weakened near-term macroeconomic prospects for Tanzania. The country is facing a drastic reduction in tourism receipts, budget pressures, and a projected deceleration of gross domestic product growth from over 6% to 4% in the current fiscal year and to 2.8% in the upcoming fiscal year, with the fiscal year ending in June” - IMF

According to Finance Minister Philip Mpango, Tanzania was seeking as much as $272 million from the IMF’s rapid credit facility and is in talks with bilateral creditors about debt relief. The government, whose leader, President John Magufuli, has declared the country free of Covid-19, is also awaiting another $50 million from the African Development Bank.

Tanzania free of COVID-19

The President of Tanzania, John Magufuli declared the East African Nation free of the novel coronavirus on Sunday, June 7 during a church service at the capital Dodoma.  Mr. Magufuli said

“the corona disease has been eliminated, thanks to God. I want to thank Tanzanians of all faiths. We have been praying and fasting for God to save us from the pandemic that has afflicted our country and the world. But God has answered us. I believe, and I’m certain that many Tanzanians believe, that the corona diseases have been eliminated.”

The worshippers welcome his declarations with applause. He further thanked the priests and the worshippers for not wearing masks and gloves as a protective mechanism against the virus.

Prior to the announcement on Sunday, the president indicated a week earlier that there were only 4 patients receiving treatment in the largest city, Dar es Salaam. On Friday June 5, at a teachers’ conference, he advised Tanzanians not to accept masks which come as donations and that, they should tell the donors to use them with their wives and children instead. According to him, the donations to fight the virus could rather end up spreading it.

The first coronavirus case in Tanzania was recorded on the 16th March 2020. According to the Tanzanian Ministry of Health, the victim was a 46-year old Tanzanian who came to Arusha from Belgium. The Tanzanian government has stopped publishing data on the number of coronavirus cases in the country for more than a month now. The last official data realised was on 29th April, 2020 with a total number of 509 cases with 21 deaths. The WHO has however raised concerns on how the Tanzanian government is handling the coronavirus.

The President of Tanzania has said on a number of occasion that the coronavirus has been exaggerated and as a result, he urged citizens to attend church services and mosques so as to pray for the virus to vanish. Tanzania never issued a formal country lockdown although social gatherings were suspended. The country has resumed economic activities fully as universities, high school finalists, sports and tourism activities resumed officially on June 1, 2020.

Key Macro-Economic Indicators

The fiscal deficit, financed mainly by concessional external debts, stood at 2% of GDP in 2019, up from 1.3% in 2018, and it’s projected to stabilize at 1.9% in 2020 and 2.2% in 2021. Inflation fell to an estimated 3.3% in 2019 from 3.6% in 2018 due to an improved food supply. External debt constituted 70.4% of total public debt in 2019. According to the AfDB, there are early signs of slow but steady structural transformation in key sectors of the Tanzanian Economy which includes the continued shift of labour from agriculture to services and industry.

Inflation rate as at April 2020 is 3.3% and unemployment rate is 1.9% and FDI inflows estimated to be around $1.1 billion. About 65% of the workforce in Tanzania is employed in agriculture. The total value of exports and imports of goods and services is equivalent to 32.2% of GDP.  Overall tax burden equals 11.8% of total domestic income. Government spending has also amounted to 16.8% of the country’s GDP over the past 3 years, according to Heritage.com. Budget deficit averaged 1.7% of GDP and public debt is equivalent to 36.0% of GDP.

The government says its priority is on industrialization and job creation with commitment to pursuing a development strategy driven mainly by the private sector. However, heritage.com indicated that these priorities are most often been undermined by erratic regulatory changes, abrupt tax increase and lack of transparency.

Factor productivity is generally low, particularly in agriculture, where its growth averaged only 0.4% between 2015 and 2017. Poverty, inequality and youth unemployment persist despite robust growth experienced by the country in last five years. Enrolments in secondary schools from people between the ages of 15 to 24 declined from 30% to 24.7%, calling into question the availability of skills from the job market.

Moving forward, the government of Tanzania needs to strengthen businesses to boost investments and ensure robust private sector participation in the economy. Tax policy needs to be strengthened and well managed to promote investment and also raise substantial revenues for the country. Access to finance to bridge the infrastructural gap should also be a major concern for the government.

Overall expenditures rose marginally year on year in 2014, but slower growth is coming.

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