Tanzania Investment and Consultant Group Ltd

| Economic Research Centre

  1. EAC Regional Headline Inflation:

The annual Headline Inflation in the EAC region was 6.7% in March 2024, up from 4.1% in February 2024. This figure indicates a region-wide increase in general prices.

  1. Annual Average Headline Inflation

For the EAC region, the annual average headline inflation for the fiscal year 2022/23 was 7.2%, up from 4.2% in the previous fiscal year.

  1. Core Inflation:

Annual Core Inflation for the EAC region stood at 7.1% in March 2024, rising from 4.3% in February 2024.

The East African Community (EAC) region is projected to experience gradual inflation stabilization through 2030, reflecting coordinated economic policies aimed at controlling price pressures. In 2023, the EAC’s headline inflation stood at 6.7%, with variations across member states, from a low of 3.8% in Tanzania to a high of 26% in Burundi. Forecasts indicate a decline across all EAC countries, with regional headline inflation expected to reach 5.8% by 2030. Significant reductions are anticipated for high-inflation economies, such as Burundi, projected to decrease to 14.5%, and South Sudan to 10.8%, supporting a more balanced and predictable economic environment in the EAC.

  1. Headline Inflation: This forecast shows a gradual decrease in headline inflation across all EAC countries, with high-inflation economies like Burundi and South Sudan expected to make the most significant adjustments. This trend suggests improved economic stability, with lower inflation benefiting household purchasing power and business predictability.
    • EAC Region: Reduction from 6.7% to 5.8% reflects region-wide stabilization efforts.
    • Burundi: A sharp decline from 26% to 14.5% indicates ambitious policy interventions.
    • Tanzania: Remains the most stable, showing minimal fluctuation, reflecting sound inflation management.
  2. Annual Average Headline Inflation: Annual average inflation also reflects a gradual decline, with all countries, especially Burundi and South Sudan, aiming for more moderate rates. The EAC region is projected to ease from 7.2% in 2023 to 6.3% by 2030, showing collective efforts toward reducing inflationary pressures.
    • Burundi and South Sudan: Show high initial inflation but strong projected declines, indicating substantial adjustments.
    • Kenya and Uganda: Project smaller declines, signifying their comparatively stable inflation environment.
  3. Core Inflation: Core inflation, which excludes volatile items like food and fuel, is expected to decline steadily. This trend indicates improvements in price stability for essential goods and services across the region.
    • Burundi: High core inflation (19.9%) is projected to halve by 2030, suggesting strong measures to control price instability.
    • EAC Region: The reduction from 7.1% to 5.7% shows a region-wide commitment to stable core prices.
    • Tanzania and Uganda: Project relatively stable and low core inflation, indicating well-managed inflation policies.

The forecasted headline inflation for each EAC country and the region through 2030

The forecasted headline inflation trends for each EAC country through 2030 show a gradual decline across the region, reflecting stabilization efforts:

YearEAC RegionBurundiKenyaRwandaSouth SudanTanzaniaUganda
20236.7%26.0%7.7%12.2%22.5%3.8%5.4%
20246.6%23.9%7.6%11.8%20.3%3.8%5.3%
20256.4%22.0%7.5%11.5%18.2%3.8%5.2%
20266.3%20.3%7.5%11.1%16.4%3.7%5.1%
20276.2%18.6%7.4%10.8%14.8%3.7%5.0%
20286.1%17.1%7.3%10.5%13.3%3.7%4.9%
20295.9%15.8%7.2%10.2%12.0%3.7%4.8%
20305.8%14.5%7.2%9.9%10.8%3.7%4.7%

Annual Average Headline Inflation Forecast for each EAC country and the region through 2030

The projected Annual Average Headline Inflation for each East African Community (EAC) country and the region through 2030 shows a gradual reduction in inflation rates, with stabilization in most countries as economic policies are anticipated to moderate inflationary pressures:

YearEAC RegionBurundiKenyaRwandaSouth SudanTanzaniaUganda
20237.2%26.0%7.7%12.2%2.4%3.8%5.4%
20247.1%23.9%7.6%11.8%2.3%3.8%5.3%
20256.9%22.0%7.5%11.5%2.1%3.8%5.2%
20266.8%20.3%7.5%11.1%2.0%3.7%5.1%
20276.6%18.6%7.4%10.8%1.9%3.7%5.0%
20286.5%17.1%7.3%10.5%1.8%3.7%4.9%
20296.4%15.8%7.2%10.2%1.7%3.7%4.8%
20306.3%14.5%7.2%9.9%1.6%3.7%4.7%

Core Inflation Forecast for each EAC country and the region through 2030

The core inflation forecast for the EAC region and each country through 2030 reflects a gradual reduction in inflation rates as countries aim for economic stabilization:

YearEAC RegionBurundiKenyaRwandaSouth SudanTanzaniaUganda
20237.1%19.9%5.9%10.0%9.8%2.0%4.7%
20246.9%18.1%5.8%9.6%9.1%2.0%4.6%
20256.7%16.5%5.7%9.2%8.5%2.0%4.4%
20266.5%15.0%5.6%8.9%7.9%2.0%4.3%
20276.3%13.7%5.4%8.5%7.3%2.0%4.2%
20286.1%12.4%5.3%8.2%6.8%2.0%4.0%
20295.9%11.3%5.2%7.8%6.3%1.9%3.9%
20305.7%10.3%5.1%7.5%5.9%1.9%3.8%

Sub-Saharan Africa's economic outlook for 2024 presents a picture of gradual recovery, with growth projected to rise from 2.4% in 2023 to 3% in 2024, and reaching 4% by 2025-2026. This recovery is driven by improving private consumption and investment, fueled by easing inflation, which is expected to decline from 7.1% in 2023 to 4.8% in 2024, allowing for potential monetary policy rate cuts. However, the region’s macroeconomic performance remains challenged by high public debt, estimated at 58% of GDP in 2024, and a fiscal deficit projected to improve to 3.3% of GDP. Risks to the outlook include conflict (e.g., in Sudan), climate-related disasters, and the region's vulnerability to external shocks, with 53% of low-income countries facing high risk of debt distress. Addressing these challenges requires fiscal reforms and targeted investments to ensure sustained growth and stability.

1. Growth Outlook in Sub-Saharan Africa:

2. Growth Environment:

3. Sub-Saharan Africa's Macroeconomic Performance:

4. Risks to the Outlook:

The Africa's Pulse October 2024 report key points about Sub-Saharan Africa's economic outlook

Sub-Saharan Africa is experiencing a gradual recovery in economic growth, but significant challenges like high debt, conflict, climate change, and limited fiscal space present risks to sustained progress. The region needs to address these challenges through fiscal reforms, targeted investments, and efforts to enhance macroeconomic stability.

  1. Economic Growth Recovery: The region's economy is projected to grow by 3% in 2024, up from 2.4% in 2023, with further acceleration to 4% by 2025-2026. This is driven mainly by private consumption and investment, supported by easing inflation and anticipated interest rate cuts. However, the growth recovery remains modest compared to other global regions.
  2. Inflation and Consumption: Inflation is expected to decline from 7.1% in 2023 to 4.8% in 2024, improving the purchasing power of households, which in turn supports private consumption. This cooling of inflation allows for potential monetary policy easing, encouraging investment and economic activity.
  3. Macroeconomic Performance: Despite growth prospects, the region faces significant challenges:
    • High Debt Levels: Public debt remains at 58% of GDP, with US$19 billion in debt service payments, mostly owed to private creditors. This reduces the fiscal space for essential investments in infrastructure and social services.
    • Fiscal Balance: Fiscal deficits are improving slightly, from 3.9% of GDP in 2023 to 3.3% in 2024, thanks to revenue collection efforts and spending cuts. However, the region's debt burden continues to limit overall progress.
  4. Risks to the Outlook:
    • Conflict and Climate Change: Ongoing conflicts, such as the war in Sudan, and extreme weather events (floods, droughts) are major risks to economic stability. These challenges undermine growth, disrupt food security, and exacerbate poverty in affected countries.
    • Vulnerability: Over 53% of low-income countries in Sub-Saharan Africa are at high risk of debt distress, and many countries are vulnerable to external shocks due to their high reliance on global financing and commodity exports.

Source: Africa’s Pulse October 2024 report

Global inflation is projected to moderate to 3.5% in 2024, with a further decline to 2.8% by 2026, aligning with central bank targets. However, inflation remains elevated, especially in Emerging Market and Developing Economies (EMDEs), where it is expected to reach 4.0% in 2024 before easing to 3.5% by 2026. Persistent inflationary pressures are driven by high energy and food prices, geopolitical tensions, and supply chain disruptions. Core inflation, particularly in the services sector, remains stubborn, requiring cautious global monetary policies, with interest rates projected to stay elevated through 2026.

1. Global Inflation Trends

2. Regional Inflation Dynamics

3. Core Inflation

4. Factors Contributing to Persistent Inflation

5. Commodity Prices and Inflation

6. Monetary Policy and Inflation Control

7. Risks to Inflation

Key Figures:

Summary:

Source: The Global Economic Prospects June 2024 report

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