Why experts are upbeat on Tanzania's 2023 economic prospects

Dar es Salaam. Tanzania on Sunday, January 1, joined the rest of the world in ushering in the New Year, with experts expressing a positive outlook for the economy in 2023.

The government expects faster economic growth this year amid accelerated recovery from the Covid-19 pandemic, which disrupted economic activities around the world.

Economic growth for Mainland Tanzania was 5.2 percent in the first half of 2022, while the projected annual growth is 4.7 percent. Zanzibar’s economy grew at 5.8 percent in the first half of 2022, consistent with the projection of 5.4 percent for the year.

“The economy is forecast to grow faster in 2023 than in the preceding year, as the spillover effects of the global shocks fade away,” the Monetary Policy Committee of the Bank of Tanzania said in a recent statement.

The Russia-Ukraine war, which began in February 2022, sent prices of essential commodities spiralling, and the government has been taking fiscal measures to contain the impact, especially on fuel prices.

Economists and analysts expect 2023 will realise some notable outcomes of efforts made to address the challenges.

“I’m optimistic about continued recovery, but the Russia-Ukraine conflict, and climate change still pose a risk to sustainable economic growth,” said Prof Donald Mmari, executive director of the research think-tank Repoa.

“I think we need adaptation measures to support farmers with irrigation schemes and harvesting rainwater to sustain agriculture,” he said, adding that adaptation was also needed in other productive sectors.

Analysts believe that investing in business will yield positive results in 2023.

Tanzania National Business Council (TNBC) executive secretary Godwill Wanga said the business community has high expectations that the business environment will improve further in 2023.

He said the government’s focus on strategic projects and the acquisition of financing from multilateral institutions directed channelled towards development projects meant that 2023 would be a year of further growth for Tanzania.

“In 2022, financial resources, including those acquired through concessional borrowing, were directed towards infrastructure and capacity building efforts, making 2023 a period of seeing tangible results from these investments,” said Dr Wanga.

“We expect returns and transformation in terms of doing business, especially in the digital and technology part of it.”

Dr Wanga said 2023 could also see notable growth of micro, small and medium enterprises (MSMEs) as liquidity and credit performed significantly well in 2022.

According to the Bank of Tanzania (BoT), credit to the private sector recorded year-on-year growth of 23.7 percent, which is significantly higher compared to the government’s target of 10.7 percent for the 2022/23 fiscal year.

“Private sector credit performance is attributed to normalisation of economic activities from the Covid-19 pandemic, coupled with supportive monetary policy conditions,” the central bank stated, adding that small and medium-sized undertakings continued to account for the largest share of the total outstanding credit.

The experts tout the implementation of regulatory reforms as outlined by the Blueprint for a continued competitiveness and industrialisation which can help in attaining sustainable and inclusive growth.

Seasoned economist and consultant Samuel Wangwe said effective implementation of the blueprint and creating a more predictable and appropriate environment for businesses in terms of taxes and governance would sustain economic growth.

He said economic diplomacy efforts made by the government under President Samia Suluhu Hassan played a key role in positioning Tanzania well on the global stage.

“The domestic business environment in terms of tax policies, regulatory frameworks need to complement these efforts,” Prof Wangwe said.

“We should also emphasise joint ventures between foreign and local investors to allow transfer of technology. This will also help to boost domestic production and reduce imports.”

His sentiments were echoed by economist and business analyst Donath Olomi, who said the positive change in perspective toward investment and business in Tanzania would be a good catalyst to economic growth.

He said the return of confidence and policy-strengthening efforts in 2022 will play a key role in tackling woes that came as a result of external shocks like the war and climate change.

“Banks have performed very well in 2022, and there are a lot of efforts directed towards other key sectors after the pandemic and the war…so in 2023, we expect to see results from these efforts,” said Dr Olomi.

Financial markets

The performance of the financial markets in 2022 has also created confidence among the market players who said they experience positive prospects.

The chief executive officer of the brokerage firm Exodus Advisory, Mr Ramadhan Kagwandi, said these good prospects are also supported by the policy and regulatory efforts that were done by the authorities in 2022.

He said the introduction of new products and market laws in the country stimulated demand and led to available of liquidity in 2022 a trend that is expected to surge in 2023.

This includes several corporate bonds and allowing investors from the Southern Africa Development Community (Sadc) region to participate in the local markets.

Under the new regulations, investors from the Sadc countries are now allowed to invest in the Tanzania bonds ad stakeholders say it will increase competitiveness, good practice and improve liquidity and price discovery.

“After the introduction of such new regulations it would take a year or less for investors in the region to study the market and we expect to see an actual impact in 2023,” said Mr Kagwandi.

“We expect more uptake on investment from both institutional and retail investors, supported by the recovery in other key sectors of the economy,” he added.

Mr Kagwandi said the performance of most of the listed firms remained outstanding, painting a bright picture for the stock markets in 2023.

The shilling has been almost stable against major global trading currencies in the year to October 2022, with the Bank of Tanzania estimating a depreciation rate of less than one percent.

An independent foreign exchange trading analyst, Mr Christopher Makombe, said the local currency would continue to be under pressure with a slight depreciation this year.

“Measures being taken by the US Federal Reserve are favouring the dollar, hence putting more pressure on the shilling and other currencies,” he said, adding that expanding economic activities in the country will also push the demand for the greenback