Tanzania Economy

The economy of Tanzania is a lower-middle-income economy that is highly dependent on agriculture. Tanzania’s economy has been transitioning from a command economy to a market economy since 1985. Although GDP has increased since the initiation of these reforms, GDP per capita has fallen sharply initially, only exceeding the figure it was before the transition around 2007
After the economy was reestablished in 2014, GDP rose by a third to $41.33 billion.

In 2020, Tanzania’s real GDP grew by 4.8% to reach $64.4 billion versus $60.8 billion in 2019. This growth has made it the second-largest economy in East Africa after Kenya, and the seventh-largest in Sub-Saharan Africa.

It has maintained relatively high economic growth compared to global trends, as in the case of African countries. It should be noted that according to World Bank data, the past five years have seen the slowest growth since 2000. The medium-term outlook is positive so far, with 6% growth expected in 2020/21, backed by great infrastructure. spending.

The World Bank (WB) expects economic growth in Tanzania to slow to 2.5% in 2020 due to the Covid-19 pandemic, which has affected the labor market, production capacity, and productivity. Tourism stopped and exports of industrial and agricultural goods declined.

On September 7, 2021, the International Monetary Fund approved $567.25 million in emergency financial assistance to support Tanzania’s efforts in responding to the Covid-19 pandemic by addressing the immediate health, humanitarian and economic costs.

The International Monetary Fund projects Tanzania’s GDP growth of +4.0% and +5.1% in 2021 and 2022 and 6.0% in 2026.

However, the African Development Bank estimates that Tanzania’s GDP will grow by 2.8% in 2021, and expects a strong recovery for 2022 and 2023 with economic growth of 4.9% and 6.3%, respectively.

Foreign Trade and Investment
Tanzania’s history of political stability has encouraged foreign direct investment. The government has committed to improving the investment climate including redrawing tax codes, floating the exchange rate, licensing foreign banks, and establishing the Investment Promotion Center to cut red tape. Tanzania has mineral resources and a largely untapped tourism sector, which could make it a viable market for foreign investment.

The stock market capitalization of listed companies in Tanzania was $588 million in 2005 by the World Bank

Zanzibar
Zanzibar’s economy is mainly based on the production of cloves (90% are grown on the island of Pemba), the main source of foreign exchange. Exports suffered from a downturn in the clove market.

The Zanzibar government was more aggressive than its mainland counterpart in carrying out economic reforms and legalized foreign exchange offices on the islands. This relaxed the economy and greatly increased the availability of consumer goods. Moreover, with external funding, the government is planning to make the port of Zanzibar a free port. Rehabilitation of existing port facilities and plans to expand these facilities will be a precursor to the free port.

The island’s manufacturing sector is mainly limited to importing alternative industries, such as cigarettes, footwear, and processed agricultural products. In 1992, the government designated two export production zones and encouraged the development of offshore financial services. Zanzibar still imports much of its basic needs, petroleum products, and manufactured items.