WB forecasts Tanzania economic slowdown this year from virus

In a week that the region’s governments were unveiling their annual budget for financial year 2020/21, the World Bank has forecast Tanzania’s economic growth to slow down sharply in 2020 to 2.5 per cent from last year’s 6.9 per cent as a result of Covid-19 pandemic and the ensuing global economic crisis.

The World Bank’s 14th Tanzania Economic Update released on June 8, shows that Dar is already feeling the impact of the pandemic just like other countries and it assumes the authorities will take additional health and economic policy measures to mitigate negative impacts.

The Bank recognises mitigating steps the government has already taken, however, there is a risk of even slower growth if additional policy response was delayed or not well-targeted.

The update which analysed transmission channels of the global crisis to the Tanzanian economy, including lower export demand, supply chain disruptions for domestic producers and suppressed consumption, shows lives and livelihoods have already been impacted and if not contained, the situation could push an additional 500,000 Tanzanians below the poverty line.

The urban self-employed and those in informal or micro enterprises, will be hard hit by the impact of the Covid-19. The report recommends building on the country’s favourable macroeconomic conditions to support a robust health and economic policy response that can mitigate negative effects and position the economy for recovery in 2021.

World Bank Country Director for Tanzania, Malawi, Zambia and Zimbabwe, Mara Warwick, said tourism, which has been one of the fastest-growing sectors in the economy contributing an estimated one percentage point to gross domestic product (GDP) growth in 2019 had been severely affected due to international travel bans and measures different countries to contain the pandemic.

“The pandemic comes at a time when poverty reduction in Tanzania has lagged despite strong economic growth over the past decade and as a result, many people have remained vulnerable to falling back into poverty amidst any shock. This underscores the need for stronger policies and investments in safety nets and human capital to ensure future resilience,” said Mr Warwick during the launch of the report.

It states that the main tourism operators in Tanzania are forecasting revenue contractions of 80 per cent or more this year, and only a mild recovery next year, conditional on how well global demand rebounds.

For Tanzanian exports that are part of the global value chains, the decline in the volume of sales will reduce demand for imported raw materials and intermediate goods.

The volume of exports will also shrink as disruption in value chains pushes up the costs of inputs and transportation, delaying import delivery times and thus the quantity of imports that exporters use as raw materials.

Due to this, the analysis indicates exports are expected to decline by 10 per cent, and imports by 1.5 per cent but with lower oil prices and higher gold prices, the country will benefit and alleviate the deterioration which will shield the current account deficit of 0.9 percentage points of GDP.