Tanzania economy is projected to grow at 5.6 percent, the central bank of Tanzania (BoT) revealed during its May 28, 2021, Monetary Policy Committee (MPC).
As Tanzania ascends towards marking a year since upgraded to a low-middle-income country, it has been taking serious steps to revamp its economy, by reshuffling its investment and trading operations.
Unlike 2020 whereas the entire world was battling COVID-19 this year the MPC noted that it was “pleased with good performance of the economy, which is amid global spillover of the adverse impact of the pandemic. Growth is estimated at 4.8 per cent in 2020, lower than the projection of 5.5 per cent, reflecting the adverse impact of the pandemic”.
Further, the committee noted that the economy in 2021 will be reinforced by several sectors particularly construction, agriculture and transport and communications activities.
These projects are rather quite far from the African Development Bank (AfDB) outlook on Tanzania’s economy. AfDB noted that “real GDP projected to grow 4.1 per cent in 2021 and 5.8 per cent in 2022, due to improved performance of the tourism sector and the reopening of trade corridors”.
However, Tanzania has managed to control its inflation handling it at moderate rates, whereas based on the new consumer price indices, inflation has remained low and within the country and regional (EAC and SADC) benchmarks in the quarter ending March 2021.
Headline inflation slowed down to 3.3 per cent during the quarter ending March 2021.
“Inflation remained low, within the target range of 3-5 per cent. The risk of increase in inflation remains muted, although a sudden rise in oil prices in the world market could lead to a rise in domestic pump prices.” The MPC review said in part.
The central bank has been implementing monetary policy to support the economic activities through bank lending to the private sector and this attempt helped the sector by shielding from the adverse impact of the pandemic which disrupted demand and supply channels of some economic activities (BoT).
On the side of the economy, the bank has shown its confidence in the external sector performance despite various challenges it faces due to the pandemic, the sector is “regaining momentum”.
“As earnings from gold nearly offset underperformance of tourism, the current account deficit remained relatively low, albeit moderately rising. Foreign exchange reserves were within the country, as well as EAC and SADC benchmarks. This helped to maintain the stability of the exchange rate and provided a buffer against short-term external shocks,” the committee noted.
Further down the line, MPC argued that there is a need to diversify export markets and promoting value addition of export to limit the vulnerability of the export sector.
The MPC also showed the performance of the private sector credit of which has marked a 4.8 percent improvement in April 2021, but “remained lower than pre-pandemic historical averages”.
“A sustained high growth of credit to the private sector is expected in the outer period of 2020/21, due to ongoing reforms to improve the business environment, post-pandemic measures, and easing of lockdown measures in trading partner countries. The MPC was satisfied with Government efforts to fast-tracking verification and payment of expenditure arrears and VAT refund, which is expected to boost credit growth and potentially provide tax space. The banking sector was capitalized and capable to support the growth of credit to the private sector,” the MPC noted.
Tanzania stands to improve its economy with the current trend of securing investment options, lucrative business deals, and curbing its economy against pandemic threat spillovers. Thus, the bank will continue to relinquish its monetary policy to support the recovery of the economy through bank lending.