Economic Developments in Tanzania
The economy continued to register strong growth momentum in 2015, with real GDP growing by 7.0 percent, same as the growth registered in 2014. The strong growth was supported by stability in power supply, moderation in oil price and high growth of credit to the private sector.
The highest growth rates in 2015 were registered in construction (16.8percent), information and communication (12.1 percent), finance and insurance (11.8 percent). The strong performance in construction was attributed to increased real estate development for residential and non-residential purposes and building of road network.
Meanwhile, growth in information and communication facilitated by increased use of mobile Services particularly the increase in utilization of airtime and expansion of broadcasting and internet services as well as increased use of mobile financial services in the country. The growth in banking and insurance industry was attributed to increased levels of financial intermediation.
Construction has been the major contributor to growth for the past two years contributing 23.9 percent and 18.8 percent in 2015 and 2014, respectively. Meanwhile, other activities which contributed strongly to output growth in 2015 include wholesale and retail trade (11.5 percent), taxes on products (10.4 percent) and agriculture (7.8 percent). The economy is expected to maintain strong growth momentum in 2016 and beyond, supported by government initiative to promote further infrastructure investments and industrialization under the Second Five Year Development Plan.
Headline inflation remained subdued at single digits throughout 2015/16. In the first half of 2015/16, annual headline inflation increased to 6.8 percent in December 2015 from 6.1 percent in June 2015 on account of increased prices of major foodstuffs. The trend was reversed in January 2016 with inflation decelerating to 5.1 percent in April 2016, mostly explained by tight monetary policy, exchange rate stability and improvement in food supply. Core inflation during July 2015 to April 2016 averaged 2.4 percent, supported by sustained tight monetary policy coupled with general moderation of import prices. Inflation is expected to remain around the medium term target of 5 percent, consistent with monetary policy stance. Achievement of this target will be helped by subdued global oil prices, improvement in domestic power and food supply and continued stability in the value of the Shilling. Government budgetary operations indicate a turnaround in revenue performance beginning November 2015, thus offsetting the sluggish performance registered in the first four months of 2015/16. During July 2015 to March 2016, domestic revenue including Local Government Authorities (LGAs) own revenue was TZS 10,346.5 billion, translating into an average collection of TZS 1,149.6 billion per month for the first nine months of 2015/16. This was 28 percent higher than the revenue collected in the similar period of 2014/15. In that year, revenue had grown by only 10 percent relative to 2013/14. The impressive performance in revenue is an outcome of the measures taken by the government to strengthen tax administration. During July 2015 to March 2016, government expenditure was TZS 12,081.6 billion, of which recurrent expenditure was TZS 9,295.3 billion and development expenditure was TZS 2,786.3 billion. During the period, overall fiscal deficit before grants was TZS 1,735.1 billion. During July 2015 to April 2016, the current account deficit narrowed by 53.4 percent to a deficit of USD 1,542.1 million, compared with a deficit of USD 3,307.5 million recorded in the corresponding period in 2014/15.
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