THE Tanzanian economy is currently experiencing healthy expansion, yet many people continue to misunderstand the significance of this growth.
This misunderstanding largely stems from a lack of clarity regarding economic indicators and their implications for the nation and its citizens. Understanding the data is crucial as it provides insight into the productivity of the economy and illustrates the progress made over recent years.
Economic growth is not merely a statistical figure; it embodies the expansion of trade relationships with other nations, the encouragement of strategic investments and the attraction of foreign investors.
Such dynamics lead to the establishment and growth of tax revenue streams, which ultimately support an employment-generating economy, particularly benefiting the youth. This approach fosters a promising future for the younger generation by creating job opportunities and stimulating economic participation.
The benefits result is the existence and expansion of tax revenue streams and increased capacity to support an employment-generating economy, particularly for the youth, offering young people a promising future.
For those of you who have been paying attention to how our economy is doing, you will concur that, for the first three months of this year, 2024--until the end of the third quarter of 2024--inflation has remained at 3.0 per cent on average good news given over the medium term, BOT anticipates inflation to stay within the 3.0 per cent to 5.0 per cent range specified in the Third Tanzania Five-Year Development Plan (FYDP III).
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This indicates that Tanzanians should be proud of their average, mainly because the inflation falling trend shows that it was 16 per cent in 2012, 7.9 per cent in 2013, 6.1 per cent in 2014 and 5.6 per cent in 2015. This trend continued to fall further, leading to 5.2 per cent in 2016, 5.3 per cent in 2017, 3.5 per cent in 2018, 3.5 per cent in 2019 and 3.3 per cent in 2020.
Although 2021 inflation slightly increased to 3.7 per cent, the following year declined to 4.3 per cent, and after that, inflation remained at 3.0 per cent. In contrast, Tanzania's inflation has remained within acceptable bounds compared to other SADC and EAC economic nations, which is a good sign Tanzania's economy is going in the right direction.
Even though there are variables that could alter this situation--like significant oil producers within their OPEC union imposing production restrictions or ongoing political unrest in major nations affecting the export of goods and services--Tanzania, given its organisational structure, might not be as affected as other countries where even inflation is currently a problem.
As I stated at the outset, I will look closely at the data that the National Bureau of Statistics and the central bank of Tanzania usually offer, covering 2021-2022 and, based on that study, what is anticipated for 2024-2025.
I will compare the statistics over the previous four years and attempt to explain their meaning to create a shared understanding, particularly for those who have difficulty understanding them.
Tanzania's economy continued to be among the fastest-growing in the world and Africa, with an average real GDP growth rate of +5.5 per cent for 2012-2021, according to an overall study of data from the institutions I previously mentioned.
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My evaluation and memory are that it was this strong growth rate that was mentioned in April 2021, during Tanzania's inaugural statement to the parliament by President Samia Suluhu Hassan, about the priorities of the Sixth Phase Government to achieve a minimum annual GDP growth rate of 8.0 per cent over the next five years.
First, what are the key data points and ratios that could shed light on the reasons behind the economy's growth? And from the viewpoint of an economist, what does that mean? Let's concentrate on the numbers that speak for themselves to gain a thorough understanding of the economic growth indicators.
Tax/GDP Ratio: Data analysis shows that in 2021/2022, the Tax/ GDP Ratio was 11.4 per cent; in 2022/23, it was 11.7 per cent; in 2023/2024, it was 12.1 per cent; and based on my projection in 2024/2025, it is likely to be 12.5 per cent. What does this growth rate signify and how does it affect people who don't understand these fancy terms related to economics? As an economic analyst, there is only one response.
The amount of revenue collected domestically has remained strong and it's possible that in recent years, efficient methods of obtaining revenue from new sources have been employed and efficient with the help of technology. A 1.1 per cent increase is reasonable for the country's economy. GDP (TZS): Data analysis shows that in 2021/2022, Tanzania's GDP reached 154.8 tri/-, and in 2022/2023, it reached 176.7 tri/-.
For 2023/24, it was 191.5tri/-; based on analysis, GDP for 2024/2025 is projected to reach 207.5tril/-.
These statistics show an increase of about 34 per cent from 2021/22 to 2024. What does this percentage increase and what is its implication to people who don't understand these jargon terms related to economics?
The answer is that a yearly increase in GDP is a sign of healthy economic expansion undertakings within the country. The budget deficit of GDP: Data analysis shows that in 2021/2022, the budget deficit of GDP was -3.2 per cent, and for 2022/2023, it was -3.5 per cent. For 2023/2024, it was -3.0 per cent and based on my projection analysis, 2024/2025 will be around -2.8 per cent. What does this percentage decrease and what is its implication to people who don't understand these jargon terms related to economics?
The answer is that government expenditure against revenue collection is managed accordingly to ensure a balance between the two, a sign of a healthy economy and fiscal and monetary measures undertaken by the government are paying off to ensure the economy grows. Public debt (per cent GDP): Data analysis shows that in 2021/2022, the public debt as a percentage of GDP was 39.5 per cent and in 2022/2023 was 40.8 per cent. For 2023/2024, it increased to 41.2 per cent and based on analysis, for 2024/2025, it is projected to reach 41.5 per cent. What does this percentage increase and its implication mean to people who don't understand these jargon terms related to economics?
The answer is that while public debt is increasing, equally, economic activities are growing at the same pace. From a financial point of view, an increase of only 2.0 per cent is minimal for four years, as reflected by the economic activities currently under implementation.
Public debt:
Data analysis shows that in 2021/2022, the public debt was 61.1tri/- and in 2022/2023, it was 72.1tri/-. For 2023/2024, it increased to 78.9 tri/-. Based on analysis, 2024/2025 is projected to reach 86.1tril/-.
What does this increase and what does its implication mean to people who don't understand these jargon terms related to economics? The answer is that 25tri/- from 2021/2022 to 2024/2025 is a slight loan increase compared to increased economic activities, considering the debt-to-GDP ratio increased slowly.
The implication is that debt is rising, but economic activities are also increasing, as the data speaks for themselves. Tanzania's tax/GDP ratio was 11.4 per cent in 2021/2022 and is projected to be 12.5 per cent in 2024/2025. In this context, the explanation is that there has been an increase in internal tax collection, supported by three main things: tax collection efficiency, better compliance and a broader tax base on the horizon.
This increase implies as follows to my friends who might find understanding these ratios. From an economic point of view, a high tax on GDP implies enhancing the government's capacity to use domestic resources to cover its social costs.
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Second, there is less need to borrow money, and third, the government can more consistently spend on social services like health, education and infrastructure. Increased national income growth: For Tanzania, national income growth is expected to grow from 154.8 tri/- recorded in 2021/2022 to 207.7tri/- projected for 2024/2025. From an economic point of view, Tanzania's economy is growing. It is healthy because a 34 per cent increase over four years is good due to the contribution from improved agriculture, mining, manufacturing and services productivity. These sectors immensely contribute to national income growth.
This effect increases job opportunities and investment opportunities, ultimately reducing poverty. Reduction in budget deficit: The reduction recorded in 2021/2022 of -3.5 per cent to the projected -2.8 per cent for 2024/2025 indicates that the government's attempts to rein in spending and develop and maintain financial discipline inside the government have been effective.
This will have the following three primary economic benefits in the long run.
First and foremost, it will lessen the need for domestic and international borrowing, offer quicker opportunities for investment in development projects and inspire confidence in local investors and those seeking long-term prosperity in the nation.
In summary, the overall advancement of Tanzania's economic development, encompassing both the mainland and the islands under the direction of Dr Samia Suluhu Hassan and Dr Hussein Mwinyi, can be briefly examined by focusing on three key areas: the expansion of our economy, the accountability of public funds and the maintenance of sound debt management.
All these factors have undoubtedly kept Tanzania appealing to domestic and foreign investors, which, in my view, give Tanzania a bright economic future.
