Tanzania Expects Economic Growth Post Covid-19

An aerial view of the Standard Gauge Railway line in Dar es Salaam.

While most other East African countries are expected to fall into a recession for the remainder of the year, Tanzania's economy is actually expected to grow.

The unexpected projection was given recently by the African Development Bank (AfDB) which stated that Tanzania's economy may expand by as much as 5.2 percent this year.

This report contradicts that of the World Bank which recently forecast that the country's economy would suffer a slowdown and slump down to 2.5 percent from last year's high of 6.4 percent.

"Despite the projected slowdown, real GDP growth in Tanzania will benefit from increased prices of gold, a major national export," reads the report in part.

The phenomena makes sense since gold prices are still climbing thanks to investors opting to use the precious metal as a store of value against the now volatile dollar. The dollar has been taking a pounding from the effects of the covid-19 global pandemic especially with new cases emerging in the US.

The uncertainty that the new outbreaks are causing is fuelling more demand for gold and hence the steady increase in the price of gold.

Price of gold reached above USD1,800 an ounce as of mid this month and that was the first time in almost a decade. The last time gold was that highly priced was in 2011 following the 2008 global economic crunch that again affected the West more than other places.

As all this plays out, it should be remembered that Tanzania is one of the World's biggest exporters of the precious stone and so, as gold prices soar, so will the Tanzanian economy benefit.

According to the Central Bank, the Bank of Tanzania (BoT), gold export earnings increased by 46.8 percent, to hit an impressive USD2.5 billion as of the close of the second quarter in May.

However, on the flip side of things, not all sector's of Tanzania's economy are enjoying an increase in income. The worst hit sectors include the tourism and hospitality industry where owing to the covid-19 outbreak, income went down) to USD2.3 billion from the highs of USD2.5 billion over the same stretch of time.

Local media reports that 'at the regional level, the GDP growth projection has taken a hit in the face of the pandemic, with East Africa's GDP projected to grow at 1.2 percent: far below the earlier projection of 5.1 percent.'

Gold vs Dollar

As economies start opening up, Tanzania gold export is expected to remain strong however gold futures reported a second loss in a row at the end of June. This slight dip by gold is related to strengthening of the U.S. dollar but it is not expected to stay down as new cases of coronavirus emerge.

Nonetheless, the value of the dollar may very well be pushed down by a rise in new cases of COVID-19 in the U.S. Reports maintain that there may be another round of business shutdowns to avoid the spread and because of that, gold prices are expected to stay strong.

The U.S. dollar was up 0.3%, while the Dow Jones Industrial Average and the S&P 500 index edged higher after the worst selloff since June 11, partly sparked by an acceleration in the rate of daily new cases of coronavirus - Reports US media.

As businesses attempt to resume some form of stability, the sharp rise in Covid-19 cases in several U.S. states created uncertainty about restarting businesses and the shape of the economic recovery.

The forecast for gold futures remains good owing to several factors and on top of that list are the new cases of Covid-19 in the US and in other countries as well.

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