Tanzania's economy is anticipated to bravely surf past the looming global recession waves, thanks to a strong laid down macroeconomic policy.
Several economists said that given the country's current economic situation, which received notable praise from the World Bank, the impact of the recession will not be severe compared to peer economies.
Early this week, the World Bank Vice-President Victoria Kwakwa praised President Samia Hassan Suluhu's 'economic miracle', where major macro parameters showed a strong post Covid-19 position, compared to many African countries.
Ms Kwaka extended the plaudit in Washington DC, USA when she met the Tanzania delegation led by Minister for Finance and Planning Dr Mwigulu Nchemba. The delegation was in Washington DC to attend the World Bank Group- International Monetary Fund (IMF) annual meetings.
The WB praise came from the fact that the inflation remained at single digit and less than 5.0 per cent, strong forex reserves, and low fiscal deficit of 3.5 per cent of GDP and well-coordinated monetary and fiscal policies plus prudent macroeconomic management.
"We have witnessed weak foreign currency reserves in many countries, but it is different in Tanzania where you have sufficient foreign reserves for about five months, similarly we have witnessed budget deficits in other countries but yours is only 3.5 per cent to GDP ratio. This is commendable," WB Vice-President said.
Reacting, Alpha Capital Head of Research and Financial Analytics, Imani Muhingo, told the 'Daily News' yesterday that on top of that, the economy has been very stable, with a 4.9 per cent GDP growth last year and projected by the IMF to gradually grow to 5.8 per cent by 2024.
"Tanzania has the lowest inflation in East Africa, and is not expected to top 6.0 per cent in the foreseeable future, especially with the easing of fuel prices," Mr Muhingo said yesterday.
According to the IMF, Tanzania's external debt is less than 30 per cent, while the financial sector is healthy and sound with almost all regulatory metrics in check except for the cost-to-income ratio and non-performing loans.
In the case of a global recession, Mr Muhingo said, the impact is expected to be less severe for Tanzania compared to many other African markets due to food sufficiency, diversified sources of foreign inflows and a highly sustainable foreign debt.
Last Tuesday, the IMF warned that the global economy was headed for "stormy waters" as it downgraded its global growth projections for next year and cautioned of a harsh worldwide recession if policymakers mishandled the fight against inflation.
"In short, the worst is yet to come, and for many people 2023 will feel like a recession," the IMF report said.
The organisation maintained its most recent forecast that the global economy will grow by 3.2 per cent this year but now projects that it will slow to 2.7 per cent next year, slightly lower than the fund's previous estimate.
An Economist-cum-Investment Banker, Dr Hildebrand Shayo said the country is not an island. If the world experiences recession automatically, given the current economy imports and exports will be relatively affected.
"But taking advantage of our current economic position and if we will strategically make use of the regional market, Tanzania will be able to survive the recession," Dr Shayo said yesterday.
Tanzania will manage to stay out of the recession by maintaining the current low inflation, increasing foreign reserve by diversifying its export portfolio, upholding low fiscal deficit to the ratio of GDP and maintaining fiscal and monetary policy discipline.
On the other hand, if the recession is severe, Tanzanians will need to face a high-interest rate rise and this will be a serious problem for businesses with bank loans.
"Businesses may find themselves facing higher borrowing and high costs on inputs," Dr Shayo said adding "likewise lenders will become more cautious in their existing book, and the ability for others to restructure their debt to survive may be a tall order".
Mr Muhingo had it that the impact shall be felt in the lower injection of Foreign Direct Investments (FDIs) and Foreign Portfolio Investments (FPIs), which shall cause a sluggish implementation of key infrastructure projects and slower economic growth.
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"We already see slow foreign participation in the FPI, which is expected to get slower with increasing interest rates in the US and increased expectations of a recession. This shall put pressure on equity turnovers and equity prices but provide an opportunity for cheap bargains for local investors," Mr Muhingo said.
The WB's Tanzania Economic Update Final Report: Empowering Women - Expanding Access to Assets and Economic Opportunities said the country had experienced over 20 years of sustained economic growth, culminating in its transition from low-income to lower-middle-income status in July 2020.
"Over the past decade, despite rapid population growth, Tanzania has achieved relatively strong economic growth and declining poverty rates," WB said.
WB said the policies and programmes of President Samia, who came to power over a year ago, reflect an evolving social and economic context, but the broad policy objectives remain guided by the Tanzania Development Vision 2025 and its supporting five-year development plans.
