Following two decades of sustained growth, Tanzania reached an important milestone in July 2020, when it formally graduated from low-income country to lower-middle-income country status. Tanzania’s achievement reflects sustained macroeconomic stability that has supported growth, in addition to the country’s rich natural endowments and strategic geographic position.
President Samia Suluhu Hassan was sworn in on March 19, 2021 as the United Republic of Tanzania’s sixth, and first woman, president, following the death of President John Pombe Magufuli on March 17, 2021. President Hassan was the Vice President of the Fifth-Phase Government from October 2015. The government has prioritized efforts to clamp down corruption, improve public infrastructure systems, improve public administration and accountability, and proper management of public resources for improved social outcomes. The 2020 Worldwide Governance Indicators show Tanzania has either deteriorated or has been stagnant in most governance indicators between 2012 and 2019 (except for control of corruption and political stability/absence of violence). The strongest decline has been in the rule of law, governance effectiveness, and voice and accountability whereby political, media and civil society organization’s freedoms have continued to shrink.
Reflecting strong income growth over the past decade, on July 1, 2020 the World Bank announced that Tanzania’s gross national income (GNI) per capita increased from $1,020 in 2018 to $1,080 in 2019, exceeding the threshold for lower-middle income status. The country’s broad vision of its development goals as a middle-income country in 2025 are set out in the Tanzania Development Vision 2025, characterized by high-quality livelihoods, peace, stability, and unity good governance, a well-educated and learning society, and a competitive economy capable of sustainable growth and shared benefits. Increased GNI per capita is impressive but not enough to reach these goals. Investing in both human development and physical capital is key to achieving these broad goals and improving the quality of life for all Tanzanians.
Tanzania has fared relatively well compared to its regional peers, but economic growth has slowed significantly. The real gross domestic product (GDP) growth rate fell from 5.8% in 2019 to an estimated 2.0% in 2020, and per capita growth turned negative for the first time in more than 25 years. The global economic slowdown has adversely affected export-oriented industries, especially tourism and traditional exports, and caused a drop in foreign investment. Gold has been the sole export to benefit from the crisis, as international gold prices rose sharply between 2019 and 2020. Although the government did not impose stringent mobility restrictions, the pandemic prompted firms and consumers to adopt precautionary behaviors, hindering domestic economic activity. Meanwhile, steep declines in production, consumption, and imports have significantly reduced fiscal revenue. The pandemic has also compounded preexisting challenges in the financial sector, and the share of nonperforming loans on bank balance sheets continues to be high, while the growth of credit to the private sector has slowed.
Slowing economic activity has adversely impacted livelihoods. During June and July 2020, the World Bank conducted a COVID-19 Business Pulse Survey (COV-BPS) covering 1,000 small and medium enterprises in Tanzania. The survey data indicate that about 140,000 formal jobs were lost in June 2020, and another 2.2 million nonfarm informal workers suffered income losses. Tanzanians employed in informal nonfarm microenterprises tend to be especially exposed to economic shocks, as they often have limited savings to draw on in a crisis. Firms reported an average decline in sales of 36%, which has jeopardized the solvency of more than three-quarters of small and medium enterprises. Most affected firms have not benefited from any type of government support, and respondents suggested that tax deferrals for firms in the most severely affected sectors, including tourism and related services, could help mitigate the disruptive effect of the crisis and enable a swift recovery.
The crisis could push an additional 600,000 people below the national poverty line. While the
poverty headcount ratio at national poverty line (TZS 49,320 per month per adult equivalent, which is equal to $1.35 per person per day in purchasing-power-parity terms) has declined modestly over time, falling from 28.2% of population in 2012 to 26.1 in 2019, Tanzania’s rapid population growth has caused the number of people living below the national poverty line to steadily increase. In 2020, the pandemic-induced economic slowdown caused the poverty rate to rise to an estimated 27.2%, compounding the effect of population growth on the absolute number of people living in poverty. Because a large share of Tanzania’s population is close to the poverty line, even a mild economic shock can push numerous households into poverty. The impact of the crisis has been especially acute among households that rely on self-employment and informal microenterprises in urban areas.
Last Updated: Mar 23, 2021