Country maintains excellent macroeconomic management but rural poor yet to experience benefits of growth
DAR ES SALAAM, November 1, 2012 – The Tanzanian economy continued to post impressive growth with a rate of more than 6 per cent over the past year in addition to a marked reduction in its fiscal deficit, despite a difficult external environment. This impressive performance resulted from the Government’s flexibility in utilizing fiscal and monetary policies, especially amidst the surge in inflation experienced from November 2011.
These are the major highlights in the latest Tanzania Economic Update released by the World Bank today, titled: ‘Spreading the Wings: From Economic Growth to Shared Prosperity’. It is the second of a biannual series that was launched by the Bank in Tanzania in February 2012. The aim of the series is to foster constructive policy dialogue between stakeholders and policymakers and to stimulate debate on essential economic issues.
“With a GDP growth rate of 6.5 percent during 2011/12 and manageable fiscal and current account deficits, Tanzania has performed better than most developed countries and better than many fast emerging economies, including India, and Brazil,” wrote Jacques Morisset, main author and Lead Economist for Tanzania, Uganda and Burundi.
The strong fiscal performance exhibited by Tanzania is further attributed to high tax collection and to Government’s effort to restrain non-priority expenditures. Such adjustment did not apply to development expenditures, which continued to expand with the objective to address existing gaps in infrastructure all over the country.
Furthermore, with this performance and despite persistent high inflation, Tanzania should continue to enjoy positive prospects with forecasted GDP growth of 6.5 to 7.0 per cent through 2014 for as long as it is not impacted upon by other external shocks including commodity and food price fluctuations. The report however warns that the current performance will only endure if Government places emphasis on fiscal and debt sustainability and the optimal use of public resources, close monitoring of public accounts, including those of public agencies and enterprises operating in the energy sector.
The Economic update, however, stresses that Tanzania’s strong economic growth has continued to elude rural households which constitute approximately two thirds of the total population and 80 percent of the poor and who continue to survive in appalling conditions. Facilitating the inclusion of rural households into the country’s growth process should be at the core of the policy debate in Tanzania.
While there is no blueprint for the achievement of socio-economic transformation, Tanzania can find inspiration in the experience of successful countries that had similar profiles a few decades ago.
“The experience of Vietnam and Malaysia has shown that widespread rural poverty does not have to be enduring,” said Philippe Dongier, World Bank Director for Tanzania, Uganda, and Burundi. These countries have been able to manage three forces that have the potential to produce transformational impact in Tanzania. These are agricultural commercialization, diversification toward high value products and off farm activities; and migration toward urban centers.