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Tanzania, United Republic of

Tanzania, United Republic of

Population 46.7 million
GDP 1,029 US$
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  2013 2014 2015 (f) 2016 (f)
GDP growth (%) 7.3 7.0 7.0 6.0
Inflation (yearly average) (%) 7.9 6.1 5.6 5.9
Budget balance (% GDP)* -6.3 -4.8 -6.0 -6.5
Current account balance (% GDP)* -11.3 -11.2 -11.7 -12.1
Public debt (% GDP) 30.9 35.2 40.2 41.8


(e) Estimate (f) Forecast  *Gants excluded


  • Mineral resources (gold)
  • Significant gas potential with off-shore reserves discovered since 2010.
  • International support


  • Inadequate infrastructure, particularly in terms of energy (electricity) and transport
  • High dependence on the price of gold
  • Religious tensions between Zanzibar and the mainland, exacerbated in context of Constitutional reform


Stable growth mainly based on investments

Growth is expected to stabilise in 2016 buoyed by infrastructure projects, in particular, the construction, begun in late 2015, of the port of Bagamoyo. Investment in the extractive sector linked to the plan for the exploitation of the gas reserves discovered in 2010, could, however, be slowed by the uncertainties surrounding changes in the legal framework applying the mining sector after the arrival of the new government in November 2015. Moreover, the fall in oil prices observed in 2015 and the unlikelihood of a rebound for 2016 could lead foreign companies to postpone their investment decisions. Services (trade, telecommunications and financial intermediation) are expected to remain dynamic. On the other hand, agricultural sector performances are more uncertain, in view of the expected consequences of the drought on crops.
Household demand is likely to be sustained by the increase in social spending announced by the new president, though price rises could limit the increase.
Low prices for the main export products (gold, cotton, coffee, cashew nuts), together with fairly low production of these products, are unlikely to allow exports to contribute positively to growth.
Inflation is likely to be accentuated by higher food prices, which account for nearly half of the price index. Moreover, the appreciation of the shilling against the dollar could push up import costs.


Stubborn budget and current account deficits

The budget deficit is likely to increase slightly in 2016. As the fiscal year covers the period from July 2015 to June 2016, the measures announced by the new government at the end of 2015, aimed, in particular, at increasing revenues, cannot be implemented before second half of 2016. The fight against tax evasion and the reduction in exemptions will not in any case have any immediate effect. Current spending will remain high, given the promises made by the president on education in particular (free secondary education), health and infrastructures (energy, transport, agriculture), which were already among the priorities set by his predecessor. The reduction in aid (from 2.6% of GDP in 2013 to 1.6% in 2015) following, in particular, the freezing of flows from some donors as a result of a corruption case in the energy sector, is also likely to have an adverse effect on the public finances.
Government debt is rising steadily because of the financing needs linked to the infrastructure projects, but the preponderance of concessional loans reduces the risk of default.
The country’s current account deficit is very high as it imports twice as much as it exports. Export revenues from the gold (30% of the total) and agricultural sectors are not expected to rise in 2016, in the absence of a recovery in prices and production. At the same time, household demand and a considerable need for capital goods, chiefly for the development of the gas sector, are expected to drive up imports. Low oil prices (30% to 40% of imports) together with income from tourism income are likely to prevent too steep a fall in the balance of trade.
The shilling, which had lost 25% of its value against the dollar between January and the end of June 2015, stabilised in the second half. The downward pressures are expected to continue in 2016 given the current account deficit and higher US interest rates, but probably less strongly than in 2015.


Considerable challenges for the new government and declining performances regarding governance

The October 2015 elections confirmed the predominance of the Chama Cha Mapinduzi (CCM) party, which won 185 of the 215 seats in parliament in an election which went off peacefully but the results of which were disputed by the opposition. The poll was moreover cancelled on the island of Zanzibar because of allegations of vote rigging. John Magufuli, who succeeded Jakaya Kikwete, who was unable to secure a third term, must now complete the constitutional reform, a source of tensions in the country, in particular concerning a likely change in the status of Zanzibar. The historic score (40%) of the main opposition Chadema party is evidence that the CCM, of which expectations are high, is losing popularity. A failure to meet these expectations could be a source of social tension.
Tanzania’s ranking on the World Bank’s governance indicators is generally comparable to that of its East African neighbours. But the country’s performances are worsening in terms of political stability (151st in 2015 against 115th in 2011) and especially in fighting corruption (162nd against 150th).


Last update: January 2016

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