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Tanzania – Fastest Economic Growth in East Africa

Tanzania GDP to grow by up to 9 percent in 2021
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Tanzania’s economy is forecast to grow by 5.2 percent this year. Meanwhile six East African countries’ economies are projected to plunge into recession. The recession is partly due to the Covid-19 pandemic ravaging the world.

The new projection by the African Development Bank (AfDB) is lower than the 6.4 percent it projected before the pandemic. Tanzania’s growth will beat 12 other Eastern African countries in 2020, according to the report. The government predicts the economy will grow by 5.5 percent this year, while the World Bank projects it to slow to 2.5 percent.

The six countries projected to go into recession in 2020 are Seychelles, Sudan, Burundi, Somalia, Comoros, and South Sudan.

The other six countries will grow economically – but doing so at a relatively lower rate than Tanzania.

The countries (with their growth rate percentages) are Rwanda (4.2), Ethiopia (3.1), Uganda (2.5), Kenya (1.4), Djibouti (1), Eritrea (0.3).

Tanzania Growth Rate due to the increase in Gold Price

Despite the projected slowdown, real GDP growth in Tanzania will benefit from increased prices of gold, a major national export.

Gold is Tanzania’s leading foreign exchange earner after overtaking tourism this May, largely due to increased prices and production volumes.

Gold reached above $1,800 an ounce Wednesday for the first time since 2011. The precious metal is benefitting from its ‘safe haven’ status as the coronavirus outbreak triggered global economy fears.

Gold price was $1,257.35 in May 2019. The price surge partly contributed to making gold Tanzania’s leading foreign exchange earner. This is after overtaking tourism which has been hit hard by the Covid-19 global pandemic.

Related: Agricultural Economics Investment

Going by the Bank of Tanzania’s latest report, gold export earnings increased by 46.8 percent. This peaked gold export earnings to $2.5 billion (about Sh5.8 trillion) in the year to May 31, 2020.

Tourism earnings went down from $2.5 billion (Sh5.8 trillion) to $2.3 billion (Sh5.3 trillion) in the same period.

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Reduced Oil Prices will also boost GDP Growth

According to the Finance and Planning Minister, Dr Philip Mpango, Tanzania was less hit by the pandemic. He stated that this is due to the measures it took to cushion the economy.

Tanzania registered its first case of the Covid-19 in mid-March. While other countries imposed partial or total lockdowns, Tanzania did not do so in hopes of protecting the people. Reason being that most of its citizens are “hand-to-mouth” cases.

The swift and massive shock of the coronavirus pandemic and shutdown measures to contain it are reported to have devastated economies of many countries across the globe.

At the regional level, the GDP growth projection has taken a hit in the face of the pandemic. For instance, East Africa’s GDP projected to grow at 5.1 percent is now moving at a slower rate of 1.2 percent.

The region’s economic growth remains robust amid emerging challenges – and until the Covid-19 outbreak peters out.

Fastest Growing Economies of the World

Tanzania along with two other East African are among the six African countries in the top-10 fastest-growing economies in the world. The two other countries are Rwanda and Ethiopia.

The region’s real GDP growth was 5.2 percent in 2018 – but slowed down to 5 percent in 2019.

The estimated slowdown in 2019 was mainly a result of adverse weather conditions and fiscal consolidation that constrained growth in public sector infrastructure projects.

Multiple political and socio-economic policy interventions are necessary to harness East Africa’s growth prospects and mitigate the underlying external and domestic risks.

The basket of measures include a bold and coordinated response to the crisis. Consolidating peace and stability; accelerating structural transformation and strengthening macroeconomic policy coordination.

Other interventions may include diversifying the development financing sources, deepening regional integration, and developing skills for workforces of the future.

In order to maintain and increase the GDP of the region, a decisive and coordinated response is necessary to contain the spread of Covid-19.