The World Bank’s recently published Tanzania Economic Update gives the country much to cheer. The country is continuing with its impressive growth trail in the region and expects an improved economic performance in 2019, but the buoyancy seems to be a shade better than the previous year. The country’s economic growth in 2019 is estimated to end at 5.6% as against 5.4% in 2018.
That being so, the other parameters like inflation, balance of payments riding on the back of a surge in gold exports in the recent days and tourism receipts etc are on an upswing. As on September 2019, gold exports, which account for 40% of the non-traditional exports from the country, were up by 26%, after a contraction in the previous year. Higher volumes and prices contributed to the bullishness. Exports of manufactured goods were up by 33%. Tourism sector also picked up by 9%.
The World Bank, however, has flagged the fiscal profligacy and underscored the need for prudential management, particularly due to coming elections, which might witness intensification of spending. Juxtaposed against the anticipated fall in revenue flow, the increase in spending is likely increase the debt –both domestic and external.
Increased spending particularly in the infrastructure sector has seen fiscal deficit moving from a modest 1.9% of the GDP in 2017-18 to a worrying 3.2% in 2018-19. However, the country has clocked the revenue target of 17.1% of the GDP, as against 14.0% in the previous fiscal year. Yet, bringing fiscal deficit to 2.3% of the GDP may remain a far cry given that the fiscal management may go for a toss in the election year.
Tanzania ranks 141 out of 190 economies in the ease of doing business ranking 2020 of the World Bank trailing Rwanda, Kenya, Uganda and Sub-Saharan peers like Zambia, Malawi, and Mozambique. The private sector is still finding doing business without hassles a goal to be accomplished. At the same time, Tanzania has taken several measures to improve the business eco system. Those included amending the Statistics Act, (which was an irritant earlier, when the ruling of the government to various analysts was to stick on to the government figures to escape from deterrents , which was subsequently changed), opening consultations for drafting the Business Facilitation and Investment bill, and passing the Finance Act 2019 expeditously. The World Bank estimates that real GDP growth for Tanzania at about 6% over the medium term, with an overriding caveat that it would depend on the speed of reforms to improve fiscal management and the business environment for private investment and growth.
