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Source: www.africaecon.org

Africa Economic Institute

Tanzania: Growth, Inflation and Efforts to Support the Economy


Tanzania is one of the poorest countries in the world. Its economy severely depends on agriculture, which makes up almost half of the country’s GDP. Agriculture also accounts for 85% of exports and employs 80% of the work force. Other important sectors are mining and tourism.

Overview

Tanzania is one of the poorest countries in the world. Its economy severely depends on agriculture, which makes up almost half of the country’s GDP. Agriculture also accounts for 85% of exports and employs 80% of the work force.  Other important sectors are mining and tourism.

 

Background

Tanzania’s economy was able to grow from 1991-2002, with an increase in industrial production and a large increase in output of minerals, mainly gold.

The Agriculture sector of the economy has not expanded much because of the outdated technology and dependence on irregular weather conditions, which such as droughts.

 

Growth

Tanzania’s economy grew about 7.5 percent in 2008, as reported by the central bank. This year, a growth of 7.5 percent depends on good performance in Agriculture and strong performance in manufacturing, construction and communication, according to the Bank of Tanzania (BoT).

Tanzania’s economic growth is currently estimated to be 5 percent in 2009, as construction and manufacturing offset a slowdown in tourism and exports, according to a Reuter poll.

 

Inflation

In May 2009, Tanzania’s inflation slowed to 11.3 percent as fuel prices declined, according to the National Bureau of Statistics, falling 70 basis points from May. Ephraim Kwesigabo, an economist at the National Bureau of Statistics said that “Non-food inflation went down including petrol, diesel and the cost of bus tickets.”

Food-driven inflation, however, is still volatile. It was about 18.6 percent in December 2008, compared with 13.6 percent in November 2008. Food inflation has now stabilized, according to Kwesigabo, at 17.8 percent.

Analysts expect Tanzania’s annual inflation to slow to 10 percent by the end of 2009 from 12 percent in April. The 2 percentage point difference may happen because of falling food and oil prices. The government predicts inflation to slow down to 6 percent by 2010.

 

Efforts to Support the Economy

The country unveiled its 2009-2010 $1.3 billion budget to ease the strain from the global slowdown on June 9th. The country plans to boost spending by 32 percent, to help local companies and agricultural cooperatives during the recession. The country will resume borrowing on the domestic market to finance increased spending, according to Finance Minister Mustafa Mkulo.

Under this new budget, mining firms would no longer be excused from tax on petroleum products, beginning with contracts that are signed with the government after July 1, 2009. Furthermore, income tax is going to be reduced by 5 percent, to 25 percent of all overall profit to encourage firms to list their equities on the Dar es Salaam market. The stimulus plan will “compensate exporters for losses, guarantee debt rescheduling and boost loans to farmers,” according to Bloomberg.

Although the Tanzanian economy has a long way to go before recovering, they have come a long way to improve it. inflation has been kept under control and is predicted to decrease; the new budget plan to help local companies and agricultural cooperatives which will help more than 80 percent of the country’s workforce.

Source: www.africaecon.org