Coronavirus in East Africa: Tanzania’s economy resilient to pandemic impact

[Geza Ulole]

Coronavirus: Tanzania’s economy resilient to pandemic impact
By David Whitehouse
Posted on Tuesday, 5 May 2020 18:07

Children near a border crossing point between Kenya and Tanzania in Namanga, Tanzania July 19, 2019. REUTERS/Njeri Mwangi

Projections by the International Monetary Fund (IMF) for a sharp slowdown in Tanzanian growth due to the coronavirus pandemic, underestimate the economy’s resilience.

The IMF predicts that growth is set to slow from 6.3% in 2019 to 2% in 2020. But the largest contributors to growth are the state’s construction, infrastructure and social services projects, says Imani Muhingo, head of research and analytics at Orbit Securities in Dar es Salaam. “There is no indication that the government will slow down in its projects.”

According to the Economist Intelligence Unit (EIU) in London, economic growth will slow to 2.7% this year. But, the EIU says, prospects to 2024 are supported by a growing services sector and planned public investments in infrastructure.

• Major projects include construction of the $11bn Bagamoyo Port and special economic zone, extension of Dar es Salaam port, a new liquefied natural gas plant at Likong’o-Mchinga worth $30bn, and a new electric railway line between Dar es Salaam and Dodoma, where a new international airport is being built.
• The challenge, Muhingo says, is that the projects are mostly handled by foreign contractors and require imported capital goods.
• The EIU forecasts a rebound to 4.8% growth in 2021, and expects that public and private infrastructure investment will support annual average real GDP growth of 5.8% in 2022-24.

Lower oil will help cushion the slowdown.

• Oil makes up a fifth of Tanzania’s imports, so a drop in the price of oil “is always good news as long as it doesn’t take the global financial system down with it,” Muhingo says.

Improved fiscal collection is also a plus.

• The state is in a stronger fiscal position than in the past, due to increased collection of taxes and improved efficiency in government operations, Muhingo says.
• An increased budget deficit can be absorbed by higher debt for which domestic appetite is still high. “The national debt is still highly sustainable.”

Minerals exports
Tanzania is one of the few countries in east Africa with fiscal space to help support growth, Citi analyst David Cowan writes in a research note on 29 April.

With elections due in October, the government could easily seek to boost spending, he argues.
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• Tanzania had a fiscal deficit of only 2.9% of GDP in 2019, compared with an average of 6% for the East Africa Community.
• Tourism is geographically concentrated in the Arusha and Kilimanjaro regions, which account for just over 9% of GDP.
• So the collapse in tourism revenue may have less impact than expected, argues Cowan.
• Likewise, stalled remittances will act as a drag on Kenyan and Uganda growth, Cowan writes, but Tanzania is less dependent.

Some accuse President John Magufuli of underestimating the dangers of the pandemic.

“Instead of a lockdown and movement restriction as in neighbouring East African countries,

Magufuli simply asked Tanzanians to pray away the virus and left places of worship open,” says David Himbara, professor of international development at Centennial College in Toronto.

“Tanzania is sleepwalking into COVID disaster.”

But there’s no obvious sign for now that the result of the elections is in doubt.

• Since the return of democracy in the mid-1980s, no incumbent Chama Cha Mapinduzi (CCM) president has failed to secure a second term. Citi sees no reason to expect anything other than Magufuli securing re-election this year.

The country’s status as the only major exporter of solid minerals in east Africa, notably gold, will help it to weather the storm.

• Cowan notes that mining and quarrying accounted for only around 4%-5% of GDP in 2018.
• But Muhingo argues that minerals prices are still a determinant of the shilling’s stability, and so a major factor in inflation and foreign direct investment.

Bottom line: State-driven infrastructure projects may be a workable model for sustaining Tanzania’s growth once the worst of the pandemic is over.

Tanzania’s conomy more resilient to pandemic impact than others

 

[memphis 101]

HUH what now?infrastructure led growth has never been a sustainable model for growth,especially now when there is a disruption in supply chains,how will they acquire components of capital and producer goods,when there is a shock in the supply side of economy,you design policies to stimulate output & increase production in the local economy .this will create jobs and balance unemloyment lost in import business.

 

[Geza Ulole]

HUH what now?infrastructure led growth has never been a sustainable model for growth,especially now when there is a disruption in supply chains,how will they acquire components of capital and producer goods,when there is a shock in the supply side of economy,you design policies to stimulate output & increase production in the local economy .this will create jobs and balance unemloyment lost in import business.

From which theory of Economics r u talking about? R u arguing what have been said by experts in these fields? BTW what disruption r u talking about? As far as i know provision of goods, materials and services for construction projects r pretty much intact for those countries that r not in lock down! Most of projects in Tanzania that r currently U/C have not stopped n will not stop as 2020/2021 budget has set funds for them!

The only sector that will be affected by COVID19 is tourism and as far as things r in the region at the moment, Tanzania bamper fharvest is poised to have strong market in the region as Locust attack spared us and Kenya, Ethiopia, South Sudan, DRC and Eritrea all need food!

As for energy and mining the prospects r pretty different!

See a new mining company is planning to enter Tanzania's market

Tanzanian Gold: PwC to assist project financing for gold mining at Buckreef

Total has just acquired Tullow oil stake read for FID before construction of East Africa crude oil pipeline starts!

https://www.reuters.com/article/us-...-stake-to-total-for-575-million-idUSKCN2250KD

 

[memphis 101]

From which theory of Economics r u talking about? R u arguing what have been said by experts in these fields? BTW what disruption r u talking about? As far as i know provision of goods, materials and services for construction projects r pretty much intact for those countries that r not in lock down! Most of projects in Tanzania that r currently U/C have not stopped n will not stop as 2020/2021 budget has set funds for them!

As for mining the prospect is pretty different! See a new mining company is planning to enter Tanzania's market
Tanzanian Gold: PwC to assist project financing for gold mining at Buckreef

Total has just acquired Tullow oil stake read for FID before construction of East Africa crude oil pipeline starts!

https://www.reuters.com/article/us-...-stake-to-total-for-575-million-idUSKCN2250KD

budgets are estimates of revenue collection which the government intends to collect, sources of your gov revenue have greatly been depressed starting with tourism,there are zero tourist coming,the multiplier & accelerator effect will even be dire,people are losing jobs ,when people are broke the gov is broke to.you speak of mining & oil project,well have you seen the price of a barrel of oil from say brent its below 30 dollars,no credible investor will pour his money on that sector,for now.same for gold.and by the way africa still pretty much imports capital goods for heavy construction,no different for Tz

 

[Geza Ulole]

budgets are estimates of revenue collection which the government intends to collect, sources of your gov revenue have greatly been depressed starting with tourism,there are zero tourist coming,the multiplier & accelerator effect will even be dire,people are losing jobs ,when people are broke the gov is broke to.you speak of mining & oil project,well have you seen the price of a barrel of oil from say brent its below 30 dollars,no credible investor will pour his money on that sector,for now.same for gold.and by the way africa still pretty much imports capital goods for heavy construction,no different for Tz

stop arguing on Tanzania's chances to grow over 4%, tell us how will Kunyaland fare on this? U have hunger! u have floods u have lock down! Just like Tanzania, Tourism wen't down! I just saw a GDP growth of 1.5% with a budget deficit of 8%!

KENYA’S ECONOMY TO REBOUND IN 2021-WORLD BANK
Photograph — Brookings Institute

The coronavirus (COVID-19) pandemic has made a significant impact on Kenya’s economy, with the country witnessing its worst economic growth in over a decade. This is as a result of Kenya’s key sectors being affected by the pandemic.
However, if countries around the world can contain the pandemic and the weather remains favourable for increased agricultural output, an immediate rebound should be expected in 2021.

According to the World Bank, 21st edition of the Kenya Economic Update report titled Turbulent Times for Growth in Kenya, Kenya’s GDP could move to 1.5 per cent this year from 5.4 percent recorded in 2019.

Although the report paints a bleak year, an immediate bounce back is expected next year with growth estimated to pick up quickly to 5.2 percent in 2021 and 5.7 percent in 2022 before reaching the growth potential of six percent in 2023.
For Kenya, economic activity is heavily weighed down by a combination of supply and demand, the worst case scenario could see growth shrink to one per cent.

Measures taken to reduce the spread of the virus, including staying at home, travel restrictions, the closure of schools and entertainment spots, the suspension of public gatherings etc.has affected both production and consumption across the economy.

Due to the pandemic, the country has experienced shocks from both the external and domestic fronts. Concerns are also high that COVID-19 could push the country into a recession. The government forecast shows a 2.5 percent GDP baseline with a potential contraction to 1.8 percent.

According to the report, “It is expected that the shock will reduce growth below that of 2008 when the country’s economy grew by 0.2 percent from 6.9 percent in 2007 as a result of the post-election violence, drought and the global financial crisis.”

Based on the report, Kenya’s economic outcome this year depends on how the pandemic plays out both internationally and in the country, along with policy actions and the responses of households and companies.

The report states that COVID-19 has affected all sectors of the economy from disrupting imports of intermediate and capital goods, exerting pressure on agricultural exports, drastically reducing tourism earnings and remittances.
In analyzing the manufacturing sector, the Purchasing Managers Index (PMI) has fallen below the 50-points mark indicating declining orders and growing negative business sentiment. The index has reduced from about 53.3 points in December 2019 to 37.5 points in March.

The government’s plans for fiscal consolidation have also been pushed off track because of the negative effects on revenue collection and increased expenditure pressures.

Before the outbreak, Kenya’s fiscal deficit had expanded to 7.7 percent of GDP in the 2018/2019 financial year from 7.4 percent in 2017/2018 while public debt had increased to 62.4 percent in December 2019.

The government’s target for this financial year was to reduce the deficit by 1.4 percentage points to 6.3 percent of GDP and contain debt. Now, the World Bank expects the deficit to rise to 8 percent of GDP in 2020.

Kenya’s economy to rebound in 2021-World Bank - Ventures Africa

 

[memphis 101]

stop arguing on Tanzania's chances to grow over 4%, tell us how will Kunyaland fare on this? U have hunger! u have floods u have lock down! Just like Tanzania, Tourism wen't down! I just saw a GDP growth of 1.5% with a budget deficit of 8%!

KENYA’S ECONOMY TO REBOUND IN 2021-WORLD BANK
Photograph — Brookings Institute

The coronavirus (COVID-19) pandemic has made a significant impact on Kenya’s economy, with the country witnessing its worst economic growth in over a decade. This is as a result of Kenya’s key sectors being affected by the pandemic.
However, if countries around the world can contain the pandemic and the weather remains favourable for increased agricultural output, an immediate rebound should be expected in 2021.

According to the World Bank, 21st edition of the Kenya Economic Update report titled Turbulent Times for Growth in Kenya, Kenya’s GDP could move to 1.5 per cent this year from 5.4 percent recorded in 2019.

Although the report paints a bleak year, an immediate bounce back is expected next year with growth estimated to pick up quickly to 5.2 percent in 2021 and 5.7 percent in 2022 before reaching the growth potential of six percent in 2023.
For Kenya, economic activity is heavily weighed down by a combination of supply and demand, the worst case scenario could see growth shrink to one per cent.

Measures taken to reduce the spread of the virus, including staying at home, travel restrictions, the closure of schools and entertainment spots, the suspension of public gatherings etc.has affected both production and consumption across the economy.

Due to the pandemic, the country has experienced shocks from both the external and domestic fronts. Concerns are also high that COVID-19 could push the country into a recession. The government forecast shows a 2.5 percent GDP baseline with a potential contraction to 1.8 percent.

According to the report, “It is expected that the shock will reduce growth below that of 2008 when the country’s economy grew by 0.2 percent from 6.9 percent in 2007 as a result of the post-election violence, drought and the global financial crisis.”

Based on the report, Kenya’s economic outcome this year depends on how the pandemic plays out both internationally and in the country, along with policy actions and the responses of households and companies.

The report states that COVID-19 has affected all sectors of the economy from disrupting imports of intermediate and capital goods, exerting pressure on agricultural exports, drastically reducing tourism earnings and remittances.
In analyzing the manufacturing sector, the Purchasing Managers Index (PMI) has fallen below the 50-points mark indicating declining orders and growing negative business sentiment. The index has reduced from about 53.3 points in December 2019 to 37.5 points in March.

The government’s plans for fiscal consolidation have also been pushed off track because of the negative effects on revenue collection and increased expenditure pressures.

Before the outbreak, Kenya’s fiscal deficit had expanded to 7.7 percent of GDP in the 2018/2019 financial year from 7.4 percent in 2017/2018 while public debt had increased to 62.4 percent in December 2019.

The government’s target for this financial year was to reduce the deficit by 1.4 percentage points to 6.3 percent of GDP and contain debt. Now, the World Bank expects the deficit to rise to 8 percent of GDP in 2020.

Kenya’s economy to rebound in 2021-World Bank - Ventures Africa

i have seen GoK has tried some form of stabilisation in form of monetery & fiscal policies,V.A.T has been reduced from 16% to 14%,this will reduce the cost of production

stop arguing on Tanzania's chances to grow over 4%, tell us how will Kunyaland fare on this? U have hunger! u have floods u have lock down! Just like Tanzania, Tourism wen't down! I just saw a GDP growth of 1.5% with a budget deficit of 8%!

KENYA’S ECONOMY TO REBOUND IN 2021-WORLD BANK
Photograph — Brookings Institute

The coronavirus (COVID-19) pandemic has made a significant impact on Kenya’s economy, with the country witnessing its worst economic growth in over a decade. This is as a result of Kenya’s key sectors being affected by the pandemic.
However, if countries around the world can contain the pandemic and the weather remains favourable for increased agricultural output, an immediate rebound should be expected in 2021.

According to the World Bank, 21st edition of the Kenya Economic Update report titled Turbulent Times for Growth in Kenya, Kenya’s GDP could move to 1.5 per cent this year from 5.4 percent recorded in 2019.

Although the report paints a bleak year, an immediate bounce back is expected next year with growth estimated to pick up quickly to 5.2 percent in 2021 and 5.7 percent in 2022 before reaching the growth potential of six percent in 2023.
For Kenya, economic activity is heavily weighed down by a combination of supply and demand, the worst case scenario could see growth shrink to one per cent.

Measures taken to reduce the spread of the virus, including staying at home, travel restrictions, the closure of schools and entertainment spots, the suspension of public gatherings etc.has affected both production and consumption across the economy.

Due to the pandemic, the country has experienced shocks from both the external and domestic fronts. Concerns are also high that COVID-19 could push the country into a recession. The government forecast shows a 2.5 percent GDP baseline with a potential contraction to 1.8 percent.

According to the report, “It is expected that the shock will reduce growth below that of 2008 when the country’s economy grew by 0.2 percent from 6.9 percent in 2007 as a result of the post-election violence, drought and the global financial crisis.”

Based on the report, Kenya’s economic outcome this year depends on how the pandemic plays out both internationally and in the country, along with policy actions and the responses of households and companies.

The report states that COVID-19 has affected all sectors of the economy from disrupting imports of intermediate and capital goods, exerting pressure on agricultural exports, drastically reducing tourism earnings and remittances.
In analyzing the manufacturing sector, the Purchasing Managers Index (PMI) has fallen below the 50-points mark indicating declining orders and growing negative business sentiment. The index has reduced from about 53.3 points in December 2019 to 37.5 points in March.

The government’s plans for fiscal consolidation have also been pushed off track because of the negative effects on revenue collection and increased expenditure pressures.

Before the outbreak, Kenya’s fiscal deficit had expanded to 7.7 percent of GDP in the 2018/2019 financial year from 7.4 percent in 2017/2018 while public debt had increased to 62.4 percent in December 2019.

The government’s target for this financial year was to reduce the deficit by 1.4 percentage points to 6.3 percent of GDP and contain debt. Now, the World Bank expects the deficit to rise to 8 percent of GDP in 2020.

Kenya’s economy to rebound in 2021-World Bank - Ventures Africa

i have seen GoK has tried some form of stabilization through monetary & fiscal policies,V.A.T has been reduced from 16% to 14% to reduce cost of production and spur output,local companies will also pay a lower tax of 25% on their profits from the current 30%,this will enable them reinvest some of their profits to increase production,income tax has also been slashed from earning ksh 28000 and downwards,this will increase disposable income of the consumer to increase spending,this will also increase total sales which in turn affect demand & supply,increased production translates to more jobs

 

[Geza Ulole]

i have seen GoK has tried some form of stabilisation in form of monetery & fiscal policies,V.A.T has been reduced from 16% to 14%,this will reduce the cost of production

i have seen GoK has tried some form of stabilization through monetary & fiscal policies,V.A.T has been reduced from 16% to 14% to reduce cost of production and spur output,local companies will also pay a lower tax of 25% on their profits from the current 30%,this will enable them reinvest some of their profits to increase production,income tax has also been slashed from earning ksh 28000 and downwards,this will increase disposable income of the consumer to increase spending,this will also increase total sales which in turn affect demand & supply,increased production translates to more jobs

As much Kenya, Ethiopia, South Sudan, Somalia n Eritrea r having hunger this year, there's no way Tanzania economy will grow below 4%! Tourism accounts only 9% of our GDP! That will just never happen with massive infrastructure projects ongoing!