Experts upbeat on economic growth amid global concerns

Dar es Salaam. Tanzanian economists have voiced optimism about the country’s economic prospects despite gloomy global projections following Russia’s invasion of Ukraine and the Covid-19 pandemic.

The world economy will take a bigger hit than previously forecast next year due to the fallout from Russia’s war in Ukraine, the Organisation for Economic Co-operation and Development (OECD) said on Monday.

In a bleak report titled Paying the Price of War, the Paris-based organisation noted that the conflict aggravated inflationary pressure when the cost of living was already rising quickly.

“The world is paying a very heavy price for Russia’s aggression against Ukraine,” OECD secretary-general Mathias Cormann said in a news conference.

However, economists in Tanzania said yesterday that the country’s growth prospects are on track.

According to the Bank of Tanzania (BoT), the economy grew by 5.4 percent in the first quarter in Mainland Tanzania, far beyond the 4.7 percent projection for the entire year.

Zanzibar’s economy

Meanwhile, Zanzibar’s economy grew by 5.1 percent, marginally below the 2022 projection of 5.4 percent.

BoT said money supply and private sector credit growth continued to increase swiftly, with the trend being attributed to monetary and fiscal policy accommodation, an improved business environment and recovery of private sector activities from the effects of Covid-19.

Private sector credit growth improved significantly in July and August, reaching around 20 percent, compared with the projection of 10.7 percent for 2022/23.

“Therefore, there is a high likelihood of realising the growth projections for 2022,” BoT governor Florens Luoga said in a policy statement.

With swift recovery of private sector activities, financing to agriculture, mining and quarrying, manufacturing and personal business undertakings had grown significantly.

Repoa executive director Donald Mmari told The Citizen that the trend shows that the country is on the right track despite the recovery process having been adversely affected by the war in Ukraine.

“The government has made concerted efforts to attract investments by improving the business climate. This has opened up new opportunities and promoted expansion,” he said.

Concessional loans

Dr Mmari added that concessional loans secured by the government have made it possible to improve service delivery.

However, Tanzania has also battled the same inflationary pressure as the rest of the world due to the disruption of supply chains and rising interest rates across the globe.

As of August, this year, inflation increased to 4.6 percent, higher than 3.8 percent that was registered during the same period in 2021.

However, the government has remained optimistic because inflation is still below the 5 percent ceiling.

“The nature of current inflation is cost-push because of the rising costs of production and limited supply of commodities such as energy and food. Its handling should therefore focus on tackling the source,” Dr Mmari said.

He added that measures should include boosting domestic production through subsidising and encouraging local supply through alternative markets.

An economist and business analyst, Dr Donath Olomi, said there is positive change in perception towards investment and the business environment in Tanzania, which has been influenced by President Samia Suluhu Hassan’s government.

“The economic potential has yet to be utilised, but we have come far, and there is this confidence as far as doing business in Tanzania is concerned. Trust has recovered, and the trajectory is good,” he said.

Predictable environment

Dr Olomi added that what Tanzania could do to foster development includes effective implementation of the blueprint and creating a more predictable and appropriate environment for businesses in terms of taxes and governance.

A prominent economist, Prof Samuel Wangwe, said economic growth can still be maintained at appropriate levels as more efforts are made in key sectors such as agriculture.

“Tanzania is not isolated from global headwinds, but we have seen such positive signs, for example, in private sector credit, where financing opportunities made available by commercial banks have been utilised effectively,” he said.