Tanzania's economy is projected to grow at a solid rate of 5-6% in 2024, outpacing Sub-Saharan Africa’s average growth of 3.5%. Key drivers of this growth include agriculture (28% of GDP), mining, and a recovering tourism sector. While global inflation, energy prices (with oil at $84 per barrel), and fiscal pressures pose risks, Tanzania’s inflation is expected to remain moderate compared to regional peers. Public debt remains sustainable, supported by large infrastructure projects like the Standard Gauge Railway. However, climate risks and global trade disruptions could impact future growth if not managed carefully.

1. Regional Context: Sub-Saharan Africa (SSA)

• Sub-Saharan Africa’s growth is projected to reach 3.5% in 2024, slightly up from 3.0% in 2023. The region is expected to experience continued growth, hitting 4.0% by 2026​.
• Tanzania, as part of this region, shares similar growth dynamics, heavily influenced by commodity prices, fiscal policies, and global trends like inflation and interest rates.

2. Tanzania’s Growth Outlook

• The World Bank forecast that Tanzania will maintain solid economic growth, particularly in sectors like agriculture, mining, and tourism.
• Growth in Tanzania is typically higher than the regional average. It has been projected to grow at around 5-6% annually, reflecting its diversified economy. Key growth drivers include:
  • Agriculture: Contributing about 28% of GDP, agriculture remains a vital part of Tanzania’s economy. Global trends in agricultural prices, projected to stabilize, could benefit Tanzania’s export revenues.
  • Mining: Tanzania is a significant exporter of gold, and global gold prices are expected to remain stable or grow slightly, which will support the mining sector.
  • Tourism: After a sharp decline during the pandemic, Tanzania’s tourism industry is recovering, contributing to higher GDP growth projections​.

3. Inflation and Fiscal Pressures in Tanzania

• Like many countries in Sub-Saharan Africa, Tanzania is expected to face moderate inflation pressures, influenced by global commodity prices, especially in food and energy. The region's inflation is expected to be higher than the global average but will stabilize in 2024.
• Tanzania’s inflation has been relatively moderate compared to some of its regional peers, thanks to government interventions and policies aimed at maintaining price stability. However, risks remain from:
  • Global energy prices: The report projects oil prices to average $84 per barrel in 2024, which could affect fuel import costs and inflation.
  • Food inflation: Tanzania’s agricultural sector could benefit from stable grain prices, helping to moderate food price inflation​.

4. Public Debt and Investment

• Tanzania’s public debt remains sustainable, but global financing conditions, including rising interest rates, pose risks. Tanzania, like other EMDEs, could face higher borrowing costs if global interest rates remain high, as expected (around 4% through 2026).
• The report emphasizes the importance of public investment in driving growth in emerging markets, and Tanzania's focus on infrastructure projects, such as the Standard Gauge Railway (SGR) and energy projects, will be crucial for sustained growth​.

5. Risks to Tanzania’s Economic Growth

• Geopolitical risks and global trade disruptions could impact Tanzania’s export sectors, especially in minerals and agricultural products.
• Climate-related risks are significant for Tanzania, where agriculture relies heavily on favorable weather conditions. Extreme weather events could disrupt food production, affecting both inflation and growth​.
• Debt distress risks in Sub-Saharan Africa remain elevated, with about 40% of EMDEs at risk. Although Tanzania is not currently in debt distress, careful fiscal management is essential to maintain sustainability​.

6. Tanzania’s Policy Responses

• To mitigate risks, Tanzania will need to focus on:
  • Strengthening public investment efficiency to ensure that infrastructure projects deliver high returns.
  • Diversifying its export base to reduce vulnerability to global commodity price swings.
  • Implementing fiscal policies that support growth while maintaining debt sustainability.

Key Figures for Tanzania (based on SSA and global trends):

• Growth: Projected at 5-6% in 2024, higher than the SSA average of 3.5%​(GEP-June-2024).
• Inflation: Expected to remain moderate but subject to global food and energy price fluctuations.
• Oil prices: $84 per barrel in 2024 could increase import costs for Tanzania, affecting inflation.
• Public investment: Tanzania’s large infrastructure projects are key to sustaining growth but require efficient management and fiscal responsibility.

Summary:

• Tanzania’s economy is expected to continue growing at a solid rate, outperforming the regional average. Growth drivers include agriculture, mining, and tourism.
• Risks from global inflation, commodity prices, and debt sustainability are present, but with sound policies, Tanzania can navigate these challenges.

Source: Global Economic Prospects June 2024 report