By Osoro Nyawangah, DAR ES SALAAM Tanzania
Tanzania’s economic growth, like the rest of the region, is expected to decelerate in 2020 before picking up slightly in 2021, according to the latest outlook of the African Development Bank released Wednesday July 8.
Cross border cargo trucks from Tanzania |
Only Tanzania and Rwanda are projected to record growth rates above 4 per cent in 2020.
In the
worst scenario, Tanzania's economy will grow at
only 4.0 per cent.
The country’s external debt stands at 26.2 per cent of GDP and domestic debt is only 37.7 per cent, and the country is ranked among the low risk debt distress countries together with Uganda.
Djibouti and South Sudan were projected to join the high growth countries in 2020, according to the report which covers 13 countries, including Rwanda, Kenya, Uganda, Ethiopia, Eritrea, Comoros, Tanzania, Djibouti, Somalia, South Sudan, Burundi.
In his speech to the national assembly on estimates of government revenue and expenditure for 2020/2021, the Tanzania Minister of Finance and Planning, Phillip Mpango, said that preliminary government assessment shows that real GDP growth rate for 2020 will decline from the initial projection of 6.9 percent to 5.5 percent.
"This is associated with various factors including COVID-19, heavy rains which led to floods and destruction of transportation infrastructure and delayed implementation of some of projects." Said Mpango.
Floods in Dar es Salaam city |
However, with the Covid-19 pandemic in the East Africa,
only Tanzania and Rwanda are projected to record growth rates above 4 per cent
in 2020.
East
Africa’s economic growth was projected to be 5.1 per cent in 2020, remaining
the fastest growing region in Africa,
according to the latest forecast from the AfDB economists.
All
countries in the region were projected to positively contribute to the growth,
except for Sudan whose economy was projected to slow by 1.6 per cent in 2020
due to the political conflict in the country.
The region’s growth is largely driven by
strong public spending in infrastructure, rising domestic demand, the benefit
of improved stability, new investment opportunities and incentives for
industrial development.
However,
with the Covid-19 related disruptions of fiscal expenditure plans, revenue
mobilization, supply chains and international market demands, the region’s
growth will be dampened significantly.
The region’s 2020 growth is projected at
1.2 percent in the baseline scenario and 0.2 percent in the worst-case
scenario.
A
recovery of 3.7 percent in the baseline scenario and 2.8 percent in the
worst-case scenario is however projected in 2021 under the assumption that
Covid-19 would be contained in the short-to-medium term.
“No
economy has been spared by the Covid-19 pandemic. Whether developed, emerging
and developing economies, all are at risk and our East African region is not an
exception,” Nnenna Nwabufo, Country Manager for East Africa Regional
Development noted.
The risk of debt distress has increased
in Ethiopia, Eritrea, Kenya, South Sudan and Sudan.
The region’s current account deficit was projected to slightly deteriorated to 6 per cent of GDP in 2020 from 5.9 per cent in 2019, this has also been revised in the wake of Covid-19 to 7.0 per cent of GDP.
President John Magufuli |
The
impact of the region’s economic growth on poverty, inequality and unemployment
is expected to remain minimal, with inequality, poverty and unemployment
expected to persist in 2020.
The
growth in the region will, however, surpass the average for Africa of -1.7 per
cent in 2020.
That shows resilience for the East
African region, according to Mercellin Ndong Ntah, the lead economist at the
Bank’s East African Regional Department.
“All
other regions (in Africa) are in recession, which means they will record
negative growth, except East Africa,” he noted.
Real GDP growth rates for five East African countries (Tanzania, Ethiopia, Kenya, Rwanda and Uganda) are projected to exceed the regional average in 2020 compared to seven countries prior to the pandemic.
The
pandemic will likely be transmitted to the region through reduced commodity
prices and trade, foreign direct investments, tourism and travel, volatility in
financial markets, and disruptions in the education and health sectors.
The
impact on commodity prices, tourism and financial markets is largely expected
to be short-term while lasting effects are envisaged for foreign direct
investments, education and health, according to AfDB.
Most East African countries are net
commodity exporters with heavy reliance on markets in Asia, notably China.
For
instance, China accounted for over 90 per cent of South Sudan’s oil exports and
over 50 per cent of Eritrea’s market for zinc and copper ore.
Economic
slowdown in China will reduce East Africa’s public revenues and foreign
exchange inflows and weaken the trade balances. However, net importers will
benefit from lower commodity prices.
Asia
is also a source of inputs for the region’s budding industrial sector, but
global supply chains have been disrupted, adversely affecting East Africa’s
industry and services sectors.
Africa
needs an immediate emergency economic stimulus to the tune of $100 billion to
respond to the Covid-19 crisis.
The International Monetary Fund (IMF) approved a $14.3 million grant under the IMF’s
Catastrophe Containment and Relief Trust (CCRT) to cover Tanzania’s debt
service falling due to the IMF from today to October 13, 2020.
Additional relief covering the period from
October 14, 2020 to April 13, 2022 will be granted subject to the availability
of resources in the CCRT, potentially bringing total relief on debt service to
the equivalent of about US$25.7 million.
Moreover, the African Development Bank
has pledged concessional loan of USD 50 million as budget support to be used in
line with Government priorities.
The debt service relief will contribute to
alleviate Tanzania’s balance of payment needs stemming from the COVID-19
pandemic.
The
report suggests that economic recovery will require the region to consolidate
peace and stability, accelerate structural transformation, strengthen
macroeconomic policy coordination, and diversify the development financing
sources.
Ndong
Ntah highlighted that to achieve structural transformation, countries should
move from low to higher value addition productivity that will allow them to
mitigate the vulnerabilities.
Deepening
regional integration and developing skills for the workforce of the future is
also seen as a key driver for recovery.
This is in addition to facilitating private sector activity to return to their growth trajectory, enabling job creation and poverty reduction. - Africa
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