Tanzania: World Bank Issues Rosy Forecast but Warns Against Risks

Photo: World Bank
Africa's Pulse, No. 19, April 2019 : An Analysis of Issues Shaping Africa’s Economic Future

Dar es Salaam — Tanzania's economy has been doing well and is projected to do even better, but the country and other top performers in Africa must guard themselves against domestic and foreign risks, a new report says.

Tanzania is among a handful of African countries whose economies are projected to grow at a rate of over six per cent this year, the World Bank notes in its latest report, attributing the growth to massive public investments in infrastructure

"Growth will stabilize but remain softer than in the recent past in several fast-growing economies, including Côte d'Ivoire, Ethiopia, and Tanzania, reflecting maturing public investments, fiscal consolidation, and a difficult business environment in some countries," the World Bank says in the 19th Volume of its Africa's Purse.

The report, which analyses issues that shape Africa's economic future, was launched yesterday, showing that in non-resource-intensive countries like Tanzania, activity is projected to pick up after slowing in 2018, supported by infrastructure investment, pro-business reforms, and stronger consumer spending.

Some of the domestic risks to growth, the World Bank notes, include recurrence of severe weather conditions and a weaker fiscal consolidation among others. African countries, the World Bank says, are vulnerable to a number of natural disasters like droughts, floods, landslides, and cyclones.

Citing the recent experiences of cyclones in Mozambique, Malawi and Zimbabwe, the Africa's Purse says building resilience to such natural disasters requires careful long-term action plans.

Africa also needs adequate fiscal consolidation to restore fiscal and external sustainability across the region, especially among countries that have experienced significant increases in public debt levels. The countries in this category include Mozambique, Sudan, Angola and Zambia among others.

"In countries holding elections this year, and where significant fiscal adjustments are required, political considerations could undermine commitments to continued tightening of fiscal policies. Fiscal frameworks could weaken and lead to the implementation of procyclical policies," the report reads.

African countries must also watch themselves against the domestic security situation which, the World Bank says, remains precarious in several countries and could be exacerbated by the challenging economic and social situation.

Of the external risks to Africa's growth momentum, the continent is must guard itself against the continued deceleration in global growth and downside risks to the global outlook.

"A sharper than expected slowdown in the United States, the euro area, and China--Sub-Saharan Africa's major trading partners-- could have significant spillover effects for the region through trade, financial, commodity, and confidence channels," the statement reads.

Besides, global trade growth decelerated in 2018, reflecting the effects of weakening industrial activity and the possibility of increasingly protectionist trade policies, and is expected to lose further momentum in 2019.

"An escalation in trade tensions could erode external demand. This would dampen export growth--a critical factor behind the ongoing rebound in economic activity in the region--and contribute to keeping the recovery subdued in many countries," Africa's Pulse says.

Overall, the report says that growth in sub-Saharan Africa has been downgraded to 2.3 per cent for 2018, down from 2.5 per cent in 2016.

World Bank, Chief Economist for Africa, Albert Zeufack, said during a video conference yesterday that the slower than expected overall growth was compounded by fragility, poor growth as well as digital performance.

"Economic growth remains below population growth for the fourth consecutive year and although regional growth is expected to rebound to 2.8 percent in 2019, it will have remained below 3 percent since 2015," he said.

Additional reporting by Rosemary Mirondo

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