The Monetary Policy Committee (MPC) of the Bank of Tanzania (BoT) said yesterday that Tanzania’s economy would grow by 5.7 percent this year, fuelled primarily by sustained public investment and normalization of global trade and investments.
“The economy is projected to grow at 5.7 percent or higher, due to sustained public investments, normalization of global trade and the rolling out of measures to improve the business environment and bank lending to the private sector,” the MPC chairman and BoT Governor, Prof Florens Luoga, said.
According to the MPC, economic growth was fairly satisfactory compared to our regional peers, despite global effects of Covid-19 on economies. The economy grew at 4.7 percent in the first 3 quarters of 2020, driven by construction, agriculture, transport, mining and quarrying.
“Given the relatively good performance of some sectors in the fourth quarter, a growth projection of 5.5 percent in 2020 could be realized,” he said.
This suggests that, during the last quarter of 2020, the economy should grow by 7.9 percent.
This would, however, be the highest growth rate to have been registered throughout the 2020 calendar year, considering that, in the first, second and third quarters, the economy grew by 5.7 percent, 4.0 percent and 4.5 percent respectively.
During its 213th ordinary meeting held on April 6, 2021, the MPC said it had taken note of the progress made by the BoT in addressing constraints on credit to the private sector and high lending rates – and underscored the need to expedite implementation of the measures adopted to facilitate growth of the economy.
Prof Luoga said the MPC was satisfied with the performance of the economy, amidst the circumstances of gloomy global growth caused by the Covid-19 global pandemic.
“Against this backdrop, the MPC decided to maintain monetary policy easing stance to facilitate fast economic growth and lending to the private sector. The decision was in line with the objective of achieving inflation of 3-to-5 percent in 2020/21,” he said.
According to him, the MPC was concerned about the slow pace of recovery of the global economy over recent months due to the Covid-19 pandemic – and observed that the outlook has improved owing to the fiscal stimulus and accommodative monetary policy executed in several countries. The improved growth prospects provide a favourable environment for exports and investments in the country.
The MPC also took note of rebasing of the consumer price index (CPI) in January 2021, to reflect current consumption patterns of goods and services by households, due to changes in taste, preference and technology.
“The new CPI covers 383 consumer goods and services, compared to 278 items in the old CPI.
The proportion of core items increased to 73.9 percent – up from 54.3 percent – while that of foods declined to 28.2 percent, down from 38.5 percent, indicating growth in average income of households,” he said.
Inflation remained low… Within the target range of 3-to-5 percent – and is projected to remain low despite renewed increase in oil prices in the world market.
The external sector remained sustainable, benefiting from higher gold prices and subdued oil prices in the world market – despite realizing reduced tourism receipts. Foreign exchange reserves were adequate: sufficient to cover about 6.2 months of imports.
Luoga said government fiscal operations were broadly on track, with satisfactory revenue performance, notwithstanding the global challenging environment on some sources. The country’s debt remains sustainable, with low risk of distress.
