Tanzania economy on steady GDP growth path

Tanzania's economy is set to maintain a steady growth trajectory in 2025, with the real GDP projected to increase by approximately 6%, up from 5.4% in 2024. This positive outlook is underpinned by various key drivers that have propelled the country's economic performance in recent years. In a recent interview on CNBC Africa, Imani Muhingo, Senior Manager of Securities Brokerage Services at CRDB Bank PLC, shed light on the factors contributing to Tanzania's impressive growth and addressed potential challenges that the economy might face. One of the key drivers highlighted by Muhingo is the government's focus on improving the business environment, leading to significant growth in sectors such as trade, construction, and agriculture. Policies implemented since 2021 have enhanced financing in the agricultural sector, with credit portfolio expansion in agriculture being the highest among sectors for three consecutive years. This emphasis on agriculture, alongside growth in construction and trade, has been bolstered by a thriving banking sector and double-digit private sector credit growth. Additionally, Muhingo emphasized the role of technology as a driver of economic growth in Tanzania. Despite the remarkable economic performance, concerns have been raised regarding inflation risks. Muhingo noted that inflation in Tanzania has remained stable, ranging between 3 to 3.5%, with foreign exchange volatility posing the highest risk. However, the diversified structure of Tanzania's economy, with revenue sources from tourism, minerals, and agricultural exports, serves as a natural hedge against foreign exchange fluctuations. The government's efforts to manage demand for foreign exchange and ensure sufficient inflows have helped maintain inflation at low levels. As Tanzania navigates its growth path, another challenge that arises is the fiscal deficit. The country has witnessed a surge in borrowing, particularly in capital markets, to finance infrastructure projects. Despite concerns about fiscal sustainability, recent bond issuances have demonstrated strong investor appetite, indicating government fiscal soundness. The Tanzanian economy's monetary policy stance has also played a crucial role in shaping market dynamics. The maintenance of the central bank rate at 6% has provided stability, with expectations for the rate to remain unchanged. The central bank's efforts to manage liquidity through reverse repurchase agreements have contributed to a balanced banking sector and a relatively stable rate environment. Looking ahead, Tanzania is poised to continue its growth momentum, with a proactive approach to addressing economic challenges and leveraging key growth drivers across various sectors. With prudent fiscal and monetary policy measures in place, the country is well-positioned to sustain its economic advancement and attract investment opportunities in the region.