Dar es Salaam. Tanzania’s economy will grow by 5.5 percent in 2020, the Monetary Policy Committee (MPC) maintained yesterday.
The team, which is part of the Bank of Tanzania’s board, exuded confidence that the BoT’s accommodative monetary policy was being implemented in such a manner that key macroeconomic indicators remained positive despite the impact of the coronavirus pandemic on the global economy.
“The MPC is satisfied that the economy continues to perform satisfactorily despite spill-over effects from the global economy due to Covid-19. The economy will grow at the projected 5.5 percent in 2020,” MPC chairman and BoT governor Florens Luoga, said.
The MPC, which met on Monday to assess the performance and outlook for the economy, asked the BoT to continue implementing accommodative monetary policy in a low inflationary environment in the remainder of 2020 in order to further stimulate growth of the economy and safeguard the stability of the financial sector.
Prof Luoga said the MPC was satisfied that the government’s fiscal policy implementation was on and that expenditure remained streamlined towards development projects and enhanced revenue mobilization.
The MPC was also satisfied that the macroeconomic indicators have continued to remain stable and within agreed regional ranges.
At the same time, inflation has remained low, averaging 3.3 percent in July-August 2020, and will range between 3-5 percent in 2020/21, as earlier projected.
The projection is underpinned by adequate domestic food supply, stable exchange rate, moderate oil prices and prudent monetary and fiscal policies.
Foreign exchange reserves remained adequate, above $5 billion and covering about 6 months of import, and the current account deficit narrowed in the year ending August 2020, owing to increase in exports, particularly gold and cashew nuts.
Similarly, the level of liquidity in the economy remained adequate and interest rates declined, albeit slightly. Private sector credit growth
was strong notwithstanding challenges on global supply chains attributable to Covid-19.
Annual growth of private sector credit was 6.8 percent in August 2020, higher than 5.5 percent in June and July 2020. The MPC maintained the view that private sector credit growth will grow by 11.6 percent in 2020/21, as projected, given the supportive monetary condition and resumption of economic activities.
The banking sector remained sound, stable and resilient with enough liquidity and adequate capital to support economic activities.
The MPC observed that external sector developments were becoming increasingly stable as more countries were abandoning the Covid-19 lockdowns and opening up global economic interactions.
The performance of the global economy was sluggish in the first half of 2020, attributed to contraction in output resulting from a near shutdown of many economic activities in most of advanced economies since the beginning of 2020 in pursuit of Covid-19 containment measures.
The global growth is projected to improve in the remainder of 2020, as most countries progressively lift restrictions associated with the pandemic.
Commenting on the statement, an economist from the University of Dar es Salaam (UDSM) Abel Kinyondo said it was encouraging that while tourism emerged as the sector that was most affected by the Covid-19 pandemic, Tanzania found solace in gold exports.
“The rise in global gold prices filled the gap and therefore, the impact would surely be minimal,” he said.
He noted however that focus should be directed towards improving performance of the private sector to stimulate economic growth going forward.