Download State of Tanzania Economy

STATE OF THE TANZANIA ECONOMY
PREPARED FOR THE NATIONAL POVERTY POLICY WEEK
State of the Tanzania Economy
President's Office, Planning Commission
25th November 2013
J.K Nyerere Conference Centre, DSM
Outline
1.
2.
3.
4.
5.
6.
7.
8.
MACROECONOMIC PERFORMANCE
SECTOR GROWTH PERFORMANCE
GOVERNMENT SECTOR
INVESTMENT AND FINANCIAL SECTOR DEVELOPMENTS
EXTERNAL SECTOR DEVELOPMENTS
TRENDS IN POVERTY & WELFARE
WHERE ARE WE ON Vision 2025?
DEALING WITH ECONOMIC CHALLENGES
1. MACROECONOMIC PERFORMANCE
• Macroeconomic performance over the period of last 10
years is impressive, underpinned by steady implementation
of policy/structural reforms; weathered through the global
recession occurred in 2009; but can and should do better
improving productivity and competitiveness.
• GDP growth (2002-2012) averaged 7.0% p.a.; it is projected
to rise up to 7.1% for 2013, compared to 6.9% in 2012. In
the medium term, GDP growth is projected to rise by up to
7.7% by 2016.
Between 2007and 2012 Tanzania recorded and average
annual growth rate of 6.8%, above the average for SSA of
5.2%. Tanzania has done well compared with Sub-Saharan
Africa (SSA) (Figure 1)
Fig. 1: Annual average growth rates of SSA and Tanzania compared 20052012)
• Inflation averaged 8.2% p.a.(2002-2012) buttressed by tight
monetary policy and cash budgeting but increased to 16.1%
in 2012, due to high world market prices for oil and food in
2012.
• On monthly basis inflation peaked at 19.7% in January 2012,
the highest observed in the past decade, however it went
down drastically to 6.3% in October 2013. Maintaining low
and stable inflation has become a major challenge for
maintaining macroeconomic stability.
• Comparison with neighbouring/trading partners (Table 1).
Table 1a. Inflation in Tanzania Compared to Neighbouring Countries (annual)
COUNTRY
2010
2011
2012
TANZANIA
5.5%
12.7 %
16.1 %
KENYA
4.1%
14.0 %
9.4 %
UGANDA
4.4 %
14.9 %
11.8 %
ZAMBIA
8.5 %
8.7 %
6.6 %
MOZAMBIQUE
12.7 %
10.4 %
2.1 %
MALAWI
7.4%
7.6 %
21.3%
SSA
7.4%
9.3 %
9.1%
Table 1b. Monthly Inflation for Tanzania, Kenya and Uganda (monthly)
COUNTRY
August 2013
September
2013
October 2013
TANZANIA
6.7
6.1
6.3
KENYA
6.6
8.2
7.7
UGANDA
7.3
8.0
8.2
On the look out against inflation:
• Variability in world market oil prices;
• Trends in food supply and distribution in Tz, Kenya and
Uganda
• Stability of the shilling against US Dollar.
• Scope for restricted money supply) -growth of money
supply (for instance, M1 decelerated to 16.3% in 2012/13 vs
22.4%in 2011/12 (annual)
• Scope for restrictive fiscal – reducing government domestic
financing – it was 2.5% of GDP in 2012 down from 3.6% in
2011.
2. SECTOR GROWTH PERFORMANCE
• 2002-2012 averages indicate that the fasted growing subsectors (annual average of more than 8 %) were mining and
quarrying (9.9%), manufacturing (8.6%) Wholesale and retail
trade (8.3%), Transport and communication (11.1%), and
Financial intermediation (10.6) (Table 2).
• 2002-2012 average growth for agriculture was only 4.2%;
4.3% in 2012 and 3.6% in 2011. In the second quarter of
2013, the sector grew by 5.3 compared to 5.1 in the
corresponding quarter in 2012. reflecting low productivity,
for an undercapitalized sector- Should be at least6% plus.
• The service sector contributes by an annual average of 46%
of GDP compared to Agriculture (24%), and industry &
construction (20%) – trend structural change (Figure 2).
Table 2: Real GDP Growth by Sector 2007 -2012 (%)
2007
2008
2009
2010
2011
2012
2013
2014
2015
Actual
Economic Activity
Agriculture, Hunting and Forestry
Crops
Livestock
Forestry and hunting
Fishing
Industry and construction
Mining and quarrying
Manufacturing
Electricity, gas
Water supply
Construction
Services
Trade and repairs
Hotels and restaurants
Transport
Communications
Financial intermediation
2016
2017
Projection
4.0%
4.5%
2.4%
2.9%
4.5%
9.5%
10.7%
8.7%
10.9%
6.5%
9.7%
8.1%
9.8%
4.4%
6.5%
20.1%
10.2%
4.6%
5.1%
2.6%
3.4%
5.0%
8.6%
2.5%
9.9%
5.4%
6.6%
10.5%
8.5%
10.0%
4.5%
6.9%
20.5%
11.9%
3.2%
3.4%
2.3%
3.5%
2.7%
7.0%
1.2%
8.0%
8.4%
5.6%
7.5%
7.2%
7.5%
4.4%
6.0%
21.9%
9.0%
4.2%
4.4%
3.4%
4.1%
1.5%
8.2%
2.7%
7.9%
10.2%
6.3%
10.2%
8.2%
8.2%
6.1%
7.0%
22.1%
10.1%
3.6%
3.5%
3.9%
3.5%
1.2%
6.9%
2.2%
7.8%
1.5%
4.0%
9.0%
7.9%
8.1%
4.6%
6.7%
19.0%
10.7%
4.3%
4.7%
3.1%
2.4%
2.9%
7.8%
7.8%
8.2%
6.0%
5.4%
7.8%
8.0%
7.7%
4.8%
7.1%
20.6%
13.2%
4.4%
4.7%
3.2%
3.1%
2.9%
7.8%
7.9%
8.3%
6.1%
5.1%
7.8%
8.1%
7.8%
5.0%
7.2%
19.2%
13.3%
4.5%
4.9%
3.2%
3.0%
3.3%
7.9%
8.2%
8.4%
6.4%
5.0%
7.7%
8.5%
8.4%
5.4%
7.6%
18.3%
13.8%
4.7%
5.1%
3.5%
2.9%
3.3%
8.3%
8.5%
8.6%
8.6%
4.9%
7.8%
8.7%
8.5%
5.8%
7.7%
18.2%
13.9%
5.0%
5.5%
3.4%
2.9%
3.9%
8.9%
8.6%
9.1%
12.3%
4.8%
7.9%
8.8%
8.6%
5.8%
7.8%
17.4%
14.0%
5.6%
6.2%
3.6%
3.2%
4.4%
9.1%
8.9%
9.4%
12.3%
4.6%
7.9%
9.0%
8.7%
6.0%
8.0%
17.0%
14.4%
7.0%
6.7%
5.5%
8.8%
3.2%
7.1%
7.0%
6.9%
9.0%
3.1%
6.8%
4.4%
7.1%
6.7%
3.2%
7.0%
6.5%
7.3%
6.9%
3.5%
6.5%
6.8%
7.4%
5.4%
3.0%
6.7%
5.8%
6.5%
5.6%
3.8%
6.6%
5.9%
6.7%
5.7%
3.6%
7.2%
6.3%
6.3%
6.0%
3.5%
7.2%
6.3%
6.4%
6.1%
3.7%
7.2%
6.4%
6.7%
6.2%
3.8%
7.1%
6.7%
6.8%
6.3%
3.8%
Gross value added before adjustments
7.3%
less FISIM
15.3%
Gross value added at constant 2001 basic prices 7.2%
Add Taxes on products
6.9%
7.5%
11.0%
7.4%
7.8%
6.1%
8.7%
6.0%
5.8%
7.1%
9.1%
7.1%
6.7%
6.5%
11.2%
6.4%
6.5%
7.0%
12.7%
6.9%
7.3%
7.1%
14.6%
7.0%
6.8%
7.4%
16.2%
7.3%
6.7%
7.7%
18.0%
7.5%
6.7%
7.9%
19.7%
7.7%
7.1%
8.3%
19.4%
8.0%
7.0%
7.4%
6.0%
7.0%
6.4%
6.9%
7.0%
7.2%
7.4%
7.7%
8.0%
Real estate and business services
Public administration
Education
Health
Other social and personal services
GDP at constant 2001 market prices
7.1%
Source: NBS
Data for year 2013 are projections
Fig. 2 Declining share of Agric. vs Industry and Services 19982012
3. GOVERNMENT SECTOR
Revenue performance
• Significant improvement in domestic revenue collections in the
recent years. E.g. Monthly collections increased from an average
of TZS37.0 bn in 1995/96 to around TZS 800.0 bn in 2013/14.
Domestic revenue effort for 2013/14 was 20.1% of GDP compared
to 18.0% of GDP in 2012/13. Good performance due to improved
tax administration and tax policy reforms (Fig.3).
• Domestic revenue collected during July – September 2013 was TZS
3,083.2 billion below the period estimate by 14 %. This reflects
delays in implementing new revenue measures approved by the
Parliament
• Programme and projects (loans and grants) increased from TZS
812,113 million and 1,063,808 million in 2008/09 TZS 1,163,131
million and 1,796,874 million in 2012/13 respectively. But the
ratios to GDP on a decreasing trend over the recent past (to
quantify).
Fig.3 Revenue Trend from 2000/01 – 2011/12
TREND OF DOMESTIC REVENUE TO GDP
18
16
% of GDP
14
12
10
8
6
4
2
0
Domestic Revenue
Revenue issues:
Expanding the scope for domestic resource mobilisation
• Non-tax revenue from natural resources, especially subsectors of forestry, fishing (esp. deep see fishing),
wildlife/tourism: efforts to curb predatory/ destructive
harvesting to go hand in hand with investments in innovative
ways of increasing productivity while ensuring sustainability
of stocks.
• Increasing efficiency and contribution of state-owned
enterprises
• Public Private Partnerships (PPP) preparations – legislation
and regulations
Government expenditure
• Government expenditure has been growing from 15% of GDP
in 2001/02 to 26.0% in 2007/08, with recurrent
expenditure grow faster - 2001/02 it grew by 11.8 of
GDP compared to 3.5% of capital expenditure while in 2011/12
reaches 16.9% recurrent and capital 9.6% resp. (Fig. 4).
• Overall deficit, inclusive of grant receipts, has been above 3.5 % of
GDP for the past ten years as a result of government’s expansion
of expenditure.
• External debt declined from US$7.268 bn for 2002/03 to US$6.999
bn in 2008/09. In GDP ratios the debt declined to 39.9% in
2011/12 but increased to US$10.354 bn in
2011/12.
• DSA shows room for borrowing, and that risk for debt distress is
low. PV of debt to GDP stands at 36%, = below 50% limit. Debt
service to export ratio is 3.4 %, far below the 25% threshold.
• Govt to continue borrowing on non-concessional terms in the
medium term - US$ 700 million in 2013/14 to 2016/17,
complemented by a 1 % of GDP borrowing from domestic sources.
Fig. 4 Government Expenditure Pattern, 2001/12 - 2011/12
30
25
% of GDP
20
15
10
5
0
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
Total Expenditure
Current Spending
Capital Spending
4. INVESTMENT AND FINANCIAL SECTOR DEVELOPMENTS
• Investment increased from 18% of GDP in 2002 to 34%
in 2012 compared to 21.7% for SSA in 2012. However,
saving remains low (18% of GDP in 2012) compared to
18.9% average for SSA.
• FDI is projected to have increased to US$ 854.2 million
in 2012 from US$ 387.6 million recorded in 2002
reflecting investment in tourism infrastructure/hotels
and mining exploration (Table 4).
• Challenges to attracting more FDI include limited
infrastructure (roads, port, railway, power); business
environment concerns; and limited access to
capital/markets by domestic entrepreneurs.
Table 4: FDI to Tanzania 1995-2011
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: Bank of Tanzania
Value of FDI (In US$ million)
150.86
148.64
157.8
172.2
516.7
463.4
467.2
387.6
308.2
330.6
447.6
616.6
653.4
744
558.4
433.9
854.2
Financial sector developments
• Expanding financial system.
• Growing from 2 to 48 banks and financial institutions
by 2012 with 530 branches. Similarly, bureaux de
change were 211, of which 29 were in Zanzibar.
Modern payment system using advanced technology
(ATMS, TISS, cell phones)
• Private sector credit grew from 6.7% of GDP in 2003
to 17.7% in June 2012.
Issues in financial development
• Rural urban gap in access –physical distribution constrained by
distance, income level low in rural areas and hence possible
profitability/vs risk by financial institutions, including microfinance
• Interest rate spread – high borrowing rates against low deposit rates,
not accessible to SMEs; at the same time, banks considering lending
risky.
• Credit reference bureau on customer information may alleviate riskiness
• Stock market development still in infancy, awareness, keenness in the
market limited
• Insurance growing, limited mainly to formal urban/modern sector.
Agriculture least covered.
5. EXTERNAL SECTOR DEVELOPMENTS
Export performance
• Over the last ten years, exports improved mainly on the
account of increased value of non-traditional exports
(minerals, fish and fish products, manufactured goods, and
oil seeds). However traditional exports (cotton, coffee,
cashew nuts, tobacco, tea) have not perform relatively well
though there are sign of improvements.
• The ratio of export of goods to GDP has relatively increased
from 9.1% in 2002 to 21.0% (twice) in 2012. Merchandise
exports increased to USD 5,912.3 million by December 2012,
compared to USD 5,097.9 million registered during the same
period in 2011, equivalent to an increase of 16.0 % (Table 5).
Table 5: GDP Ratio of Export and Import of Goods
Exports (%)
Imports(%)
2002
9.10
14.00
2003
10.50
16.60
2004
11.50
19.30
2005
11.90
21.20
2006
12.20
27.10
2007
12.00
28.80
2008
15.00
33.80
2009
15.30
27.00
2010
18.80
31.00
2011
21.10
40.80
2012
21.00
36.20
• Traditional exports reached USD 956.7 million in 2012 compared to
USD 206.1 million in 2007. This reflects an increase in export volumes
of coffee, cotton and cashew nuts.
• Service receipts increased to USD 2,632.1 million in 2012 compared
to USD 920.1 million in 2002. The increase in service receipts was
largely attributed to improvements in transportation, insurance, travel
and other business receipts.
• Diversification and competitiveness issues remain critical.
Imports
• In the past decade, imports of goods grew from 14% to GDP in 2002
to 36% to GDP in 2012. Merchandise imports amounted to USD
10,324.9 million (fob) in 2012, compared to USD 9,827.5 million in
2011 (increase of 5.1 %)
• Service imports (payments for transport, construction, financial and
communication services) increased to USD 2,362.6 million in 2012
from USD 2,208.1 million in 2011 (a increase of 7.0%).
Current Account
• During 2012, the current account deficit was USD 3,658.1 million
compared to USD 3,992.2 million in 2011.
• The decreased deficit in the current account was attributed by
improve in exports of goods and services.
6. TRENDS IN POVERTY & WELFARE
• Real per capita GDP increased from US$304 (2002 average) to US$647 in
2012.
• As per HBS 2007, Population below the basic needs poverty line declined
from 35.7% in 2001 to 33.3% in 2007 (Rural: 37% in 2007 vs 39% in 2001).
Population below food poverty line: 17% in 2007 vs 19% in 2001.
• Recent results from the 2010/11 National Panel Survey shows that:
• As per Poverty and inequality remained stable in Tanzania between
2008/09 and 2010/11. That the Gini coefficient which measures
inequality went from 0.36 to 0.37 and poverty headcount up from 15 %
to 18 %.
• that access to electricity had increased from 13 % to 17 % between
2008/09 and 2010/11.
• Access to safe drinking water in Tanzania is about 74 % of urban
households compared to about 40 % of rural counterparts.
• Secondary and higher education enrolment has risen between 2008/09
and 2010/11 from 23 % to 27 % and from 3 % to 4 % resp.
• Stunting has fallen across the board from 43 % in 2008/09 to 35 % in
2010/11. The proportion of stunted children in rural areas is always
higher than in urban areas.
MDGs country report since 2006
Most recent HBS results here [ ].
• However, all show persistence of rural-urban divide and
different degrees (usually %) of deprivation.
• Survey results/analyses useful in pinpointing out where
poverty bites most, most vulnerable sections of society,
for subsequent targeting of social/economic support e.g.
through social protection, provided adequate public funds
have been generated and targeting is accurate.
Rarely, however, do we acknowledge public goods put in
place – as reported by the MKUKUTA Annual
Implementation Reports (MAIRs)and Annual
Development Plans – the added stock of physical facilities
such as roads, education and health facilities –
notwithstanding the O&M issues
Productive capacity for goods and services (growth) is
paramount for expanding the base for resources needed
for social support
7. WHERE ARE WE ON Vision 2025?
Tanzania
Development
Vision 2025
(2000-2025)
It set the broad national goals to attain a “middleincome country status”; was to be implemented in a
series of Five Year Development Plans. Implementation
was overshadowed by the Highly Indebted Poor
Countries (HIPCs) initiative vide Poverty Reduction
Strategy Paper (PRSP) approach PRS,MKUKUTA I&II (1999/00-202/03), 2005/06-2009/10; 2010/11-2014/15).
15-year Long Term Perspective Plan (LTPP)
2011/12–2025/26 sub-set of Vision 2025, to
accelerate growth towards end-point of Vision
2025; divided into three consecutive Five Year
Development Plans, each assigned a thematic
objective. Currently in (new) FYDP I (2011/1215/16)
Long Term Perspective Plan (LTPP) 2011/12–2025/26
First Five Year Development Plan -2011/12-2015/16
–LTPP occasioned by need to revert back to defining a
roadmap toward development aspirations in the context
of five year horizon
–Re-awakening to Tanzania’s latent growth potentials in
the country natural resources such as minerals and
geographical advantages such as natural harbours,
gateway to neighboring countries, to the economic might
of our nation.
–informed and acting on the previous analyses of the
critical growth constraints to arrive at the FYDP core
priorities: agriculture uncontested priority sector, in dire
need for specific productivity-enhancement interventions
mainly adoption of mechanization and
commercialization, improved inputs supported by
research, marketing oversight against middlemanship
etc..
• Given the expanse of the country, infrastructure for
transport to support access to markets for farm products
and inputs,
• energy together with industry for value-addition on
agricultural and mining output and employment generation,
water (for productive activities, irrigation and domestic use);
and
• human capital development as a cross-cutting key driver, as
noted earlier, for knowledge and innovation capacities that
are required by all sectors to raise productivity and
competitiveness, including capacities in policy design,
implementation and evaluation.
• Economic services in particular financial services, tourism
and trade formerly remote areas now with improved
transport and energy in rural areas to enhance availability of
financial services in rural areas, more professional staff
(health and education workers, agricultural experts) into
areas with facilities.
• Great anticipation for progress on rural infrastructure, to
narrow the rural-urban divide, while targeting urbanbased poverty, particularly among educated and lesseducated unemployed.
• with rural areas accessing services, provisioning for
business and finance support to youth or women,
organized productive groups by state and non-state actors
becomes easier, through “packaged interventions”.
8. DEALING WITH ECONOMIC CHALLENGES
The economy highly susceptible to many shocks: despite
the fact that, macroeconomic stability has been maintained
since the mid 1990s,
• In 2012, the annual rate of inflation increased sharply to 19.7 % largely
associated with the drought, and persistent increase in petroleum prices
in the world markets.
• Preparedness for such shock requires strengthening productive capacity
at every opportunity and build stocks (food and foreign exchange
reserves)
Domestic revenue has recently increased, yet the tax base
needs to widen further.
• Substantial progress has been made in strengthening tax
administration, which underlies most of the recent increase in
revenue mobilization. But also, public spending has increased
significantly.
Challenge - how to more efficiently use the resources in order
to sustain the widening expenditure base, with emphasis on
development spending, so programmed as to anticipate recurrent
obligations generated by development spending. Cutting down on
some recurrent spending items feasible.
Austerity budgetary measures may be necessary; not
compromising critical public service delivery and focus
on key national infrastructure services (esp. transport
and energy) and nation-building.
The manufacturing sector: has grown at an average of
8.8% per year since 2002; contribution to GDP, low at
around 8%. The sector has growth potential derived from its
linkages to the rest of the economy include. agriculture
sector and country’s natural resource base, esp. forestry,
minerals and fisheries.
access to financial capital for SMEs; technology;
infrastructure (especially energy); skilled labor; reduce
compliance costs (due to regulation) and enhance its
international competitiveness.
Mining Sector: has been the most dynamic sector,
expanding at an average growth of around 9.9% (20022012), but its share to GDP remains small of about 3%.
– ensuring that the sector is linked with domestic economy
by improving prospects for domestic value addition, by
creating requisite skills.
Trade deficit has increased:
• Rising of exports have been more than offset by the
increase in imports, resulting in an increase in the trade
deficit.
– ensure that imports are of productive nature (capital
and intermediate goods).
Drive for export development through increased
knowledge and technology (K&T) content – for expertise
inputs for agriculture all the way to manufacturing:
• Domestic technological deepening and upgrading for
moving from resource-based, low technology
manufacturing to medium and high-tech production
would require re-invigorated/ if designed education
and training programs (for requisite
skills/competencies) –needed- competitive labor force
• Preparing to participate in and realize the benefits of
the country’s natural resources, in the main, the gas
discoveries – through building requisite K&T skills for
the local people and firms
• Policy and procedural-related snags to
competiveness to be addressed – red tape/
why is Tanzania sliding on the world scale of
competitiveness (important for domestic and
foreign investments as well)
• Capacity strengthening for small producers
on good trade practices, ability to meet
environmental/health standards (good for
both domestic and foreign consumers);
negotiation around other technical and nontechnical barriers to trade
• Management of public investment more efficiently:
Capacity in public investment management and
execution of the development budget are going to be
essential tools for Tanzanians to handle large
infrastructure projects including those related to gas
sub-sector.
Implementation effectiveness as challenge – BRN has to
work, meant to inculcate and show results of
disciplined, committed determination to work out
agreed detailed programmes.
Needed correct attitudes towards public funds and
property, hard work and self-less service for nationbuilding.
End
THANK YOU FOR LISTENING
L. Rutasitara Deputy Executive Secretary (Macroeconomy), President’s
Office-Planning Commission, Dar es Salaam