Tanzania’s central bank upbeat on 2025 economic outlook

Dar es Salaam. The Bank of Tanzania (BoT) has projected a positive economic outlook for 2025, with both Mainland Tanzania and Zanzibar expected to experience swift growth.

Mainland Tanzania’s economy is projected to expand by approximately six percent, while Zanzibar’s growth is forecast to reach 6.8 percent.

The central bank’s Monetary Policy Committee (MPC) banks on multiple factors, including improved global economic conditions, robust agricultural output, ongoing infrastructure development, and supportive fiscal and monetary policies.

BoT governor Emmanuel Tutuba said on Wednesday the committee is projecting robust growth, stable inflation, and improved external sector performance.

BoT expects exchange rate pressures to remain muted in early 2025, bolstered by adequate foreign exchange reserves exceeding $5.5 billion, he added.

“The positive outlook is underpinned by several factors, including agricultural production, progress in construction projects, improvements in transport and logistics, reliable power supply, and supportive fiscal and monetary policies,” Mr Tutuba told reporters.

The optimism stems from the outcomes of the MPC meeting held on Tuesday during which the Central Bank Rate (CBR) was maintained at six percent for the first quarter of the year.

The team assessed the global and domestic economic conditions, and based on the performance, decided to maintain the rate at six percent in the first quarter of 2025.

The MPC observed that, keeping the CBR unchanged, would ensure adequate liquidity in the economy, tie-down inflation expectations below the target of five percent, and facilitate the high economic growth of around 5.7 percent in the first quarter of 2025.

“In addition, it will keep exchange rate pressures muted, thus limiting its impact on inflation and reducing incentives to transact in foreign currency in the country,” Mr Tutuba said.

Mainland Tanzania’s growth in 2025 is expected to be driven by agriculture, transport, construction, and trade, while Zanzibar’s economy will benefit from tourism, manufacturing, and real estate development. Improved global conditions, including easing commodity prices and supportive fiscal policies, further reinforce this outlook.

Others are stable inflation and fiscal discipline he said inflation remained well-contained in 2024, averaging 3 percent in Mainland Tanzania and 4.5 percent in Zanzibar, both below the target of 5 percent.

“This stability was driven by adequate food supply, moderate global commodity prices, and prudent fiscal measures,” Mr Tutuba said.

Inflation in 2025 is expected to stay low, at around 3.1 percent in Mainland Tanzania and 4 percent in Zanzibar, supported by reliable power supply, stable exchange rates and favourable global market conditions.

Additionally, he said Tanzania’s fiscal performance has been strong, with tax revenue surpassing targets due to enhanced economic activities and improved tax compliance.

“The government has also ensured that public debt remains sustainable, with a debt-to-GDP ratio of 41.1 percent, well below the regional thresholds,” Mr Tutuba said.

He added that the external sector saw significant improvement in 2024.

“Exports of goods and services grew to 20 percent of GDP, driven by tourism, gold, cashew nuts, and tobacco.”

The current account deficit for Mainland Tanzania dropped to 2.7 percent of GDP from 3.7 percent in 2023, while Zanzibar maintained a surplus.

Additionally, foreign exchange liquidity improved due to increased export earnings and a decline in global interest rates.

“The shilling appreciated, supported by reduced speculative activity and the implementation of Section 26 of the BoT Act, encouraging the use of the local currency for domestic transactions,” Mr Tutuba said.

Private sector credit growth in 2024 reached 16.9 percent, reflecting increased demand for loans and improved economic conditions. This was further supported by a decline in non-performing loans to 3.6 percent by November 2024, down from 4.2 percent a year earlier.

The central bank governor noted that these developments reflect the resilience of Tanzania’s economy amid global uncertainties.

“BoT is committed to monitoring economic trends and taking appropriate measures to sustain growth and stability.”

Mr Tutba said the MPC will reconvene in April 2025 to reassess conditions and determine monetary policy for the second quarter.

“With a stable macroeconomic environment and effective policy implementation, Tanzania is well-positioned to achieve its economic targets for 2025.”