Why economy is on right track

• AfDB projects 6.1 growth rate
• Analysts point sectors that will spur growth

TANZANIA: TANZANIA’s economy is on a positive trajectory of growth, signalling recovery from various global shocks and improvement in the country’s domestic economic conditions.

The Africa Development Bank (AfDB) latest Macroeconomic Performance and Outlook (MEO) report forecasts that Tanzania’s economy will grow at 6.1 per cent this year. In East Africa, Tanzania has the second top-performing economy after Rwanda (7.2 per cent) followed by Uganda (6 per cent).

According to the MEO report, Tanzania is among 11 African countries projected to experience strong economic performance. The African continent remains the second-fastest-growing region after Asia.

The latest Bank of Tanzania (BoT) projections for the country’s economy stand at 5.5 per cent this year, up from 5 per cent recorded last year.

Reacting to these projections, the Centre for Chinese Studies at the University of Dar es Salaam Director, Professor Humphrey Moshi, said the upward trend of the economy is good news indicating that the country is recovering from global shocks including Covid-19, tightened financial conditions, tightening monetary policy, and geopolitical tension.

“Our economy is on the right track, and as domestic economic conditions continue to improve, the economy will stick to its upward trend,” he said.

However, Prof Moshi underscored the need to put more effort into improving electricity generation to ensure that manufacturing and other productive sectors get reliable power to lower production costs and make Tanzanian goods competitive in the market.

“Availability of electricity is still unreliable. This is not good for our industrial sector. More efforts should be put into finding alternative energy sources to cut down production costs,” he stressed.

Prof Moshi also mentioned that the trickledown effects of the positive trajectory rate of the economy should be reflected in the improvement of people’s living standards.

Therefore, concerted efforts should be directed at poverty reduction by augmenting investment in the agriculture sector, which employs about 70 per cent of the country’s workforce and contributes around 30 per cent of GDP.

He said increasing agriculture investment will guarantee the country’s food security and surplus for exports. On his part, Alpha Capital Head of Research and Financial Analytics, Imani Muhingo, said the GDP growth projected for Tanzania is one of the highest in East Africa and higher than the overall average of the Sub-Saharan Africa region.

This resulted from a combination of a well-diversified economy and business-friendly policies undertaken by the government to improve the investment climate. He said the results of pro-business policies are evident in the performance of the financial sector, which saw double-digit real growth last year, particularly in the banking sector which has seen net profits grow ten-fold in the last six years.

“We expect the banking sector growth to begin to reflect in other sectors being financed, such as agriculture which has seen the highest credit growth than all other sectors in the last two years. We also expect further growth from mining and tourism as the mended bilateral and multilateral relations encourage more investments and promote the country and opportunities available,” he said.

An economist-cum-investment banker, Dr Hildebrand Shayo, said the government has continued to create a favourable business environment, which is a significant factor in attracting more investors into the country.

“We are on a positive trajectory rate, and going forward with new investment deals being signed, our economy will continue to gain and become more competitive,” he noted.

He said that the government has been meeting various economic targets set since the sixth phase government entered into power, giving confidence to the business community and other investors in the country.

Dr Shayo also said that the completion of various strategic projects like the Julius Nyerere Hydropower Project Plant (JNHPP), ongoing Standard Gauge Railway (SGR), implementation of the Liquefied Natural Gas (LNG) plant in the Lindi Region, and signing of mining licenses will spur the country’s economic growth.

He said, however, that the economic growth projections of 5.5 per cent this year given by the Bank of Tanzania (BoT) are more realistic because it considered the situation on the ground.

He said the AfDB data relied on social, political, and economic conditions and how the nation responded to international issues.

Furthermore, Dr Shayo said AfDB took into consideration the way the government responded to internal issues, including the 4Rs, and election reforms that give certainty and confidence to investors in the country’s future.

The Saint Augustine University of Tanzania (SAUT) Economics lecturer, Dr Isaac Safari, said the AfDB projection on the country’s economy is good news, indicating that the government’s efforts to create favourable economic conditions are yielding positive results. He said AfDB took into consideration investment data in various sectors like industry, agriculture, infrastructures, as well as the social and political conditions.

“From the data above, AfDB is seeing an upward trend in various production sectors that will have multiplier effects on people’s living standards,” he said.