Ekonomske analize
Tanzania, United Republic of

Tanzania, United Republic of

Population 47.6 million
GDP 957 US$
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major macro economic indicators

  2014 2015  2016 (f) 2017 (f)
GDP growth (%) 7.0 7.0 6.6 6.8
Inflation (yearly average) (%) 6.1 5.6 5.2 5.0
Budget balance (% GDP) -4.7 -4.2 -5.1 -6.0
Current account balance (% GDP) -11.6 -9.2 -8.7 -9.4
Public debt (% GDP) 33.8 36.5 38.3 39.7


(e) Estimate (f) Forecast

(*) grants excluded


  • Rich in mineral resources (gold)
  • Significant gas potential, thanks to offshore reserves discovered in 2010
  • International support


  • Inadequate infrastructure, especially regarding energy (electricity) and transport
  • Highly dependent on the price of gold
  • Religious tensions between Zanzibar and the mainland


Robust growth driven by infrastructure projects

Economic activity is expected to maintain momentum in 2017, buoyed by the completion of the ambitious programme of infrastructure projects. The "Vision 2025" plan includes increasing electricity production capacity and expansion of the road, air (extension of Dar Es Salaam airport), rail transport routes and of port capacity. The government's goal is to foster trade with its isolated neighbours (in particular DRC, Zambia, Rwanda and Uganda). The construction of a pipeline to transport the oil due to be extracted from Uganda's oil fields by 2020 will also boost growth. Services (retail trade, telecommunication, finances) are expected to remain dynamic. The investment decisions of foreign companies to participate in the development of offshore gas reserves discovered in 2010, have been suspended in the light of uncertainties over hydrocarbon price movements and also over the legal and fiscal framework of the sector.

Household demand (about 60% of GDP) is likely to be sustained by greater availability of credit, thanks to improved financial intermediation and inflation set to remain contained.

Higher imported food and oil prices are expected to maintain inflationary tensions, although these are not likely to sharpen thanks to the shilling's relative stability against the dollar and a fairly restrictive monetary policy targeting an inflation rate of 5 to 8% in the medium term.


Persistent and growing budget and current account deficits

The fiscal deficit is likely to continue to widen during the 2016/17 fiscal year (July to June). Investment spending is expected to reach 10% of GDP, namely double the previous fiscal year. This strong climb will be only partially offset by the expected reduction in current spending (almost 70% of the total in 2016) resulting from a freeze on civil service recruitment and wages, as well as government austerity measures.

Meanwhile, the measures aimed at increasing revenues from taxes (strengthening the tax administration to improve collection, higher taxes on tourism and telecommunications) and from non-fiscal sources (increase in the contribution of quasi-public enterprises to the budget), can only be implemented gradually. The decline in grants (down from 2.6% of GDP in 2013 to 1.3% in 2017) could also put pressure on the public finances. State indebtedness is rising steadily because of the major financing needs associated with the infrastructure projects, but the predominance of concessional loans reduces the risk of default. The government is, moreover, expected to make use of public/private partnerships.

Tanzania's current account deficit is structurally high as the country imports twice as much as it exports. Household demand and the need for equipment in the context of infrastructure projects look set to drive up imports. The oil price (25% to 30% of imports) is unlikely to fall strongly in 2017, preventing another drop in the energy bill.

The current account deficit is expected to keep putting downward pressure on the shilling exchange rate in 2017, but its depreciation against the dollar is expected to remain moderate, given the considerable flows of FDIs into the country. The ban on the export of mining products (including gold and copper, in order to increase the local transformation activities) announced by the government in March 2017 may deteriorate further the current account balance.


Major challenges for the new government

The October 2015 elections, the results of which were contested by the opposition, confirmed the predominance of the Chama Cha Mapinduzi Party (CCM). Its presidential candidate, John Magufuli took over leadership of Tanzania. Ali Mohamed Shein, also a member of the CCM, was re-elected in on the semi-autonomous island of Zanzibar in March 2016, after the result of the election in late 2015 was cancelled because of accusations of fraud. The historic result (40% of the ballots cast) achieved by the main opposition party (Chadema), is, however, evidence, that the presidential party, expectations of which are high, is losing popularity.

The new president was elected on an anti-corruption programme. He dismissed several high-ranking officials on coming to office and took measures to improve the efficiency of the administration (reducing the number of ministers from 30 to 19). Tanzania's ranking with regard to some of the World Bank's governance indicators is on an improving trend (156th in 2015 compared with 162nd in 2014 on the Corruption Perceptions Index). Progress on political freedom is however less spectacular (122nd compared with 119th).


Last update: March 2017

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