TANZANIA

Key conditions andchallenges

Table 1

2023

Population, million

67.6GDP, current US$ billion

79.2

GDP per capita, current US$1170.8

International poverty rate ($2.15)

a44.9
a74.3

a92.3

Lower middle-income poverty rate ($3.65)
Upper middle-income poverty rate ($6.85)
Gini index

a40.5

School enrollment, primary (% gross)

b95.5

b66.2

Total GHG emissions (mtCO2e)

162.9Life expectancy at birth, years

Source: WDI, Macro Poverty Outlook, and official data.
a/ Most recent value (2018), 2017 PPPs.
b/ WDI for School enrollment (2022); Life expectancy(2021).

Tanzania’s real GDP growth momentum
remained strong at 5.2 percent in 2023,
with low and stable inflation. While bothfiscal and current account deficit narrowed, the foreign exchange challenge
persists. Over the medium term, the economy is set to grow at around 6 percent,supported by increased private investments resulting from strengthening business environment. Major risks to the outlook are incomplete implementation of reforms, climate change, and deteriorationof global economy.

Tanzania’s economy has remained resilient
amid multiple shocks, but the current
growth pattern is not inclusive enough.
The impact of economic growth on poverty reduction is near-zero. Increasing reliance on public infrastructure investments
and a slowing structural transformation
since 2014 led recent growth to be concentrated in modern sectors that employ few
workers from poor households. Policies
designed to improve productivity andbuild resilience in Tanzania’s agricultural
sector—which produces just one-quarterof the country’s GDP and has employed
three quarters of the poor—could help facilitate structural transformation and reduce high and persistent poverty rates.
Diminishing role of Tanzania’s exports is
another key challenge. Tanzania’s export
to GDP ratio fell from 20.9 percent in 2012
to 14.3 percent in 2022. Main drivers behind the deteriorating export competitiveness are low productivity growth, hightrade costs, as well as other tariff and nontariff barriers. As a shrinking export volume will likely constrain growth in Tanzania and yield fewer foreign exchange earnings, the government should implement
steadfast reforms to crowd in private
investment (including FDI) and reduce
trade costs to strengthen the country’s export competitiveness. Priority policies include active engagements in the regional
free trade area, improving business climate

for private sector and productive jobs creation, as well as enhanced social protection, human capital, and skills.

Recent developments
Despite the spillovers from the climatechange, Tanzania’ economic growth accelerated to 5.2 percent in 2023, from 4.6 percent in 2022. The agriculture sector posted
low growth at 3.4 percent, due largely tofrequent droughts and floods, while thelow growth in industry of 3.9 percent wasdue to underperformance of construction
and water subsectors. Supported by buoyant economic activities in financial and insurance, transport and storage, and tradeand repair subsectors, the services sector
remained the main driver of the economy
and expanded faster by 7.3 percent in 2023.
Tanzania’s inflation continues to remain
low and stable at 3.0 percent in February
2024, thanks to eased global commodity
prices, reasonably rapid fiscal subsidies,and tightening monetary policies.
Both external and fiscal balances havemoderately improved. Bolstered by reduced domestic demand on imported
consumer goods, shrinking cost of oil
imports, and an uptick in tourism receipts, Tanzania’s current account deficit
has narrowed from 5.6 percent of GDP in
2022 to 3.8 percent in 2023. The improved
current-account position, combined with arelatively fast depreciation of Tanzania
shilling against US dollars during the second half of 2023, partly alleviated pressure
on the BoT’s foreign-exchange reserves.

FIGURE 1 Tanzania / Real GDP growth and sectoral
contributions to real GDP growth

FIGURE 2 Tanzania / Actual and projected poverty rates
and real GDP per capita

Percent, percentage points
7Poverty rate (%)

690

Real GDP per capita (constant million LCU)

100

2.5

80

5

2.0

70

460

350

1.5

40

2

1.0

30

120010

2020

2021

2022

2023e

2024p

Agriculture
Services
GDP at constant prices

2025p

0.502026p

0.02007 2009 2011 2013 2015 2017 2019 2021 2023 2025

Industry
Net taxes on production

Source: World Bank staff estimates and projections.

International poverty rate

Lower middle-income pov. rate

Upper middle-income pov. rateReal GDP pc

Source: World Bank. Notes: see Table 2.

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However, the forex supply-demand imbalances persist, including a parallel foreignexchange market though the premium remains small. Between June and December
2023, Tanzania shilling depreciated by 7.8
percent against US dollars while gross reserves rose from US$5.2 billion (4.8 monthsof imports) to US$5.5 billion (4.5 monthsof imports). Fiscal deficit has narrowed to
3.8 percent of GDP in 2023 from 3.9 percent
in 2022 due to a combination of increaseddomestic revenue mobilization and controlled expenditures. Meanwhile, the riskof external debt distress remains moderate.
Despite the shortages in US dollars, sugar, and electricity, the country is poised
to sustain a downward trend in poverty.
Poverty measured at the international
poverty line of $2.15 per day (2017 PPP)
is estimated to have dropped slightly
from 44 percent in 2022 to 43.5 percent in
2023. The reduction in extreme poverty
is accompanied by improvements in other non-monetary poverty measures, asevidenced by data from the 2022 Demographics and Health Survey, whereprogress has been observed in several
SDG indicators, such as the reduction
in child stunting. Despite this progress,challenges still loom; heavy rains experienced at the close of 2023, which hampered sugar cane harvesting, alongside
recent floods in Hanang district, underscore the country’s vulnerability to climate-related shocks. Climate shocks
strain an already fragile agricultural system, contributing to the escalation offood prices. Data from the National Bureau of Statistics, for instance, indicatesa 12 percent surge in food and non-alcoholic beverages prices since January 2022,
disproportionately impacting urban areas
where poverty is on the rise, particularly
in Dar-es-Salaam.

OutlookReal GDP is projected to grow at 5.6 percent in 2024 and its long-run potentialof about 6 percent in the medium term,
supported by improving business environment and the steadfast implementation of structural reforms. The current
account deficit is set to narrow further
to 3.3 percent in 2024 because of theimproved trade balance, supported byTABLE 2 Tanzania / Macro poverty outlook indicators

rapid growth of gold, services, and manufactured exports. Increasing FDI inflows
and concessional external borrowing willcontinue to fund the current accountdeficit and help keep official gross reserves at an adequate level. The fiscal
deficit is projected to decline to 3.6 percent in 2024 and near 3 percent in themedium term. This is on account of expected higher tax revenue collections as
business climate improves and stabilized
total expenditures. The financing sourcesof the narrowing fiscal deficit are bothforeign and domestic loans.
The mains risks to the macro-economic
outlook include incomplete implementation of structural reforms particularly
those related to boosting private sector, theintensifying impacts of climate change onfood security and tourism sectors, and ongoing geopolitical tensions.
Projections suggest a continued decreasein the poverty rate, anticipated to decline
from 42.4 percent in 2025 to 41.7 percent
in 2026. This downward trajectory is supported by a promising macroeconomic
outlook and an agriculture budget aimed
at unlocking productivity through promoting the intensification of agriculture.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices
Private consumption
Government consumption
Gross fixed capital investment
Exports, goods and services
Imports, goods and services

2021
4.3
2.3
9.0
7.8
5.2
9.6

2022
4.6
4.6
8.4
9.6
10.2
23.7

2023e
5.2
2.2
3.1
3.8
17.4
2.3

2024f
5.6
2.9
7.7
6.2
9.3
4.2

2025f
6.0
3.5
10.3
6.9
6.3
4.1

2026f
6.4
3.1
5.2
9.4
9.1
6.5

Real GDP growth, at constant factor prices
Agriculture
Industry
Services

4.3
3.7
4.1
4.8

4.6
3.8
4.3
5.3

5.2
3.4
3.9
7.3

5.6
3.8
5.6
6.7

6.0
4.8
6.2
6.5

6.4
5.5
6.3
7.1

Inflation (consumer price index)

3.7

4.3

3.8

3.4

3.2

3.0

Current account balance (% of GDP)Net foreign direct investment inflow (% of GDP)

-3.2
1.6-5.6
1.7-3.8
1.8-3.3
2.3-3.2
2.6-3.0
2.8

Fiscal balance (% of GDP)
Revenues (% of GDP)
Debt (% of GDP)
Primary balance (% of GDP)

-3.8
14.5
42.0
-2.1

-3.9
15.3
43.6-2.1-3.8
15.8
42.2-1.6

-3.6
16.2
41.0
-1.5

-3.4
16.5
39.7
-1.5

-3.1
16.7
37.3
-1.3

44.3
73.9
91.7

44.0
73.6
91.4

43.5
73.3
90.9

43.0
72.8
90.4

42.4
72.4
89.8

41.7
71.9
89.2

1.3
11.1

0.6
10.9

0.8
10.9

1.1
11.0

1.2
11.0

1.2
11.1

a,b

International poverty rate ($2.15 in 2017 PPP)a,b
Lower middle-income poverty rate ($3.65 in 2017 PPP)a,b
Upper middle-income poverty rate ($6.85 in 2017 PPP)
GHG emissions growth (mtCO2e)
Energy related GHG emissions (% of total)

Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
a/ Calculations based on 2013- and 2018-HBS. Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026.
b/ Projection using point to point elasticity at regional level with pass-through = 0.7 based on GDP per capita in constant LCU.

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