Tanzania to experience 2% growth in 2020 despite COVID-19

Tanzania is one of Africa’s fastest-growing economies, with annual GDP growth averaging 7% since 2000, according to the World Bank. Tanzania has been enjoying steady economic growth in recent years, and large natural gas reserves along the southeastern coast plus significant mineral resources in the north and west hold the potential for transforming its economy over the coming decades. Economic expansion is also being driven by mining and energy, given Tanzania’s deposits of gold and natural gas.

According to Oxford Business Group, agriculture occupies a central role in the economy, accounting for around 29% of GDP and employing some two fifths of the population. Corn, rice, sorghum and bananas are among the country’s main cultivated crops, and agricultural exports form a key source of foreign revenue, primarily from coffee, cotton and cashew nuts. That said, tourism remains the biggest generator of foreign exchange, bringing in $2bn in 2014.

The IMF predicts that growth is set to slow from 6.3% in 2019 to 2% in 2020. The government projected the economy to expand by 5.5 percent in 2020, less than an earlier projection of 6.9 percent due to the Covid-19. The World Bank lowered it even further to 2.5 percent this year as a result of the effects of Covid-19 which has disrupted economic activities. The Economist Intelligence Unit (EIU), however, projected economic growth to slow to 2.7% this year.

According to “theafricareport”, Tanzania had a fiscal deficit of only 2.9% of GDP in 2019, compared with an average of 6% for the East Africa Community. However, Moody’s projects a moderate deterioration in the fiscal balance to 4.2% of GDP in the fiscal year 2020/2021 as compared to an estimated 0.8% for the 2019/2020 fiscal year. this projection has downgraded the ratings of the government of Tanzania from B1 to B2 and changed the outlook from negative to stable.

The Bureau of National Statistics (BNS) said that the Annual Headline Inflation Rate for the month of July, 2020 has slightly increased to 3.3% from 3.2% recorded in June, 2020. The increase of the headline inflation explains that, the speed of price change for commodities for the year ended July, 2020 has increased compared to the speed recorded for the year ended June, 2020. The overall index went up to 120.50 in July, 2020 from 116.61 recorded in July, 2019.

Unemployment averages about 10% and underemployment is widespread. Short-term austerity measures by the government plus greatly stiffened revenue collection and regulatory measures mean that many Tanzanians are feeling an economic pinch.

The NBS classified Economic activities into three main categories; primary, secondary and tertiary. The largest contributor to GDP in the first quarter of 2020 was Tertiary activities which accounted for 42.0 percent, followed by Primary activities by 33.2 percent and Secondary activities had the least share of 24.7 percent.

The authorities target a modest overall fiscal deficit of 2.3% of GDP in 2019/20, which will expand to 3-4% of GDP over the medium term. The planned deficit will be financed largely by non-concessional loans. The current account deficit is expected to widen (6-7% of GDP) largely due to increased imports of capital goods to support public infrastructure projects.

 Growth in first quarter of 2020.

According to the quarterly economic highlights report released by the National Bureau of Statistics (NBS), Tanzania's economy grew by 5.7 percent during the first quarter of 2020. The growth is lower than the 6.3 percent recorded in the first three months of 2019. The country's Gross Domestic Product (GDP) at constant prices stood at Sh31.6 trillion during the period from January to March 2020, up from Sh29.9 trillion in the corresponding period in 2019.

The report further stated that, mining and quarrying recorded the highest growth rate, 15.3 percent, followed by human health and social work (10.2 percent) and professional, scientific and technical services (8.9 percent).

Transport and storage came fourth (8.3 percent), followed by information and communication (8.3 percent), construction (8.0 percent), administrative and support services (8.0 percent), and 'other' services, which grew at 7.8 percent.

Crop production and fishing industries slowed to 3.8 percent and 0.7 percent respectively during the quarter, compared to 4.3 percent and 19.4 percent registered in the corresponding quarter of 2019.

Manufacturing and construction activities recorded a growth of 4.7 percent and 8.0 percent, compared to 4.9 percent and 13.4 percent in the similar quarter of 2019.

Electricity, gas, steam and air conditioning supplies growth rates dropped to 3.3 percent, from 11.3 percent recorded in the corresponding quarter of 2019.

Gold beats tourism to become Tanzania's leading foreign exchange earner. This is because of the significant impact of the coronavirus on the hospitality sector across the globe. The measures put in place by various governments especially, the closure of borders and ban on international travels has crippled once leading foreign exchange sector in the economy.

Fish Industry takes a new turn

The government has enacted the Deep-Sea Fishing Management and Development Act 2020, replacing the Deep-Sea Fishing Authority Act of 1998. The aim of the new Act, according to the minister Luhaga Mpina, is to attract more public and private sector investors in the sector. The government has also reformed the Fisheries Act (No 22 of 2003) with the aim of separating fishing activities from water species issues.

Rebound of tourism sector

Tourism is one of the cornerstones of Tanzania’s economy, contributing about 17.2% to the country’s gross domestic product and 25% of all foreign exchange revenues. The sector, which provides direct employment for more than 600,000 people, generated approximately $2.4 billion in 2018, according to Umaizi.

According to the Tanzanian ministry of tourism, the number of tourists arriving in Tanzania rose from 1.3 million in 2017 to 1.5 million in 2018, whereas this increment made the sector to garner $2.4 billion (7.2 percent increase) compared to 2.3 billion in 2017. Tourism is geographically concentrated in the Arusha and Kilimanjaro regions, which account for just over 9% of GDP.

But due to the outbreak of the coronavirus in mid-March this year, the country’s tourism sector has incurred huge losses due to travel restrictions imposed by governments worldwide to quell the menacing virus.

The government earlier this year issued a statement that at about 477,000 jobs could be lost, while revenue will shrink by 77 percent if the virus outbreak endures hurting people past October this year.

In June, the minister of tourism and natural resources, Hamisi Kigwangalla told parliament that the number of tourists who visited the country had sharply declined by 76% from 1.9 million last year to approximately 437,000.

However, the tourism sector has started to rebound as the fears of the coronavirus began to fade away.  International airlines including KLM Royal Dutch Airlines, Swiss Air and Emirates, which halted flights in mid-March, are now flying to and from Tanzania, according AA.

Thomas Mihayo, chairman of the Tanzania Tourist Board, a government agency tasked with overseeing the tourism sector, said he is upbeat about the sector’s recovery, adding the government has adopted strategies to make the industry more sustainable in the future.

 October Elections

Tanzania's Election Commission (EC) has set October 28 as the date for the country's highly anticipated presidential election. The election campaign run from August 26 to October 27.

President John Magufuli is seeking re-election after being chosen earlier in August as the candidate of the governing Chama Cha Mapinduzi (CCM) party. The president, who took office in 2015 promising to crack down on corruption and expand the country's road and railway network, has been accused of narrowing freedom of speech and increasing authoritarianism.

During his first term, newspapers have been shut down, and the work of non-governmental organizations has been severely restricted, with rights groups and opposition parties accusing Magufuli's government of curbing human rights.

Chadema, the main opposition party, has chosen Tundu Lissu as their flagbearer to take on President John Magufuli in October’s general elections. Lissu returned to Tanzania from Belgium in August for the first time since 2017, when the Magufuli critic was shot 16 times by unknown gunmen in Dodoma.

Lissu says that since Magufuli came to power in 2015, there has been an open war against the multiparty system and some attempts to turn the country back to the dark years. The current president has received backlashes from the supporters of the opposition party who accused him of oppressing democracy since voted into power.

Ibrahim Chawe, a member of the Chadema Party and a communication officer for the Chadema youth organization, says the performance of the current government will help Lissu win. The economic policies of the government have hurt many Tanzanians, he says, and benefit only a few.

Tanzanians will also vote on the same day to elect members of parliament and local councillors. The opposition has called for the formation of an independent electoral commission, expressing fears the elections will take place in a climate of violence and intimidation. President John Magufuli has, however, pledged peaceful and credible elections, and has said he is ready to continue for a second term in order to fulfil his journey of serving Tanzanians and boosting the country’s economy, according to VOA news.

Speaking to the VOA news, a Political analyst, Abdul Karimu Atiki says the new roads, railways and power plants that have sprung up under Magufuli give the president a chance to win another term. Magufuli has boosted government revenue and initiated reforms of the mining industry since coming to power in 2015.  However, the candidate for the opposition will look to capitalize in his long involvement in Tanzanian politics to rally the people around him to win power come October.

Momentum in the global economy firmed up in the final quarter of last year amid broad-based gains in developed economies