Tanzania’s economic outlook remains uncertain due to supply-chain disruptions caused by the war in Ukraine

Tanzania’s economic outlook remains uncertain, largely reflecting supply-chain disruptions caused by the war in Ukraine and climate-related challenges according to the latest Monetary Policy Committee (MPC) statement released by the Bank of Tanzania (BoT).

According to the MPC statement, the external sector of Tanzania’s economy has remained sustainable but continue to be undermined by global supply-side shocks, which include high import prices and tightened financial conditions.

The MPC met on November 28, 2022 to assess the recent implementation of monetary policy and economic performance and on the On the basis of the assessment made, and given spillover effects of the current global supply-side shocks on inflation and output, the MPC decided to continue lessening monetary policy accommodation in November and December 2022.

“The policy decision is intended to align inflation expectations with the target, while safeguarding growth of economic activities. It also aims at facilitating attainment of monetary targets for the quarter ending December 2022,” the statement said.

In addition, the MPC discussed performance of the global economy and noted that it continued to be undermined by supply-side shocks.

“Based on this, the IMF forecasts growth to be lower in 2022 and 2023 than earlier projected. Inflation also remained above targets in most countries, due to high commodity prices and climate-related challenges, prompting central banks to further tighten monetary policy,” the statement added.

The MPC however noted that it was satisfied with the recent implementation of monetary policy and performance of the domestic economy, despite being faced with a challenging global environment.

MPC observed that the manner in which monetary policy was implemented, and its outcome were consistent with the plan which helped to maintain liquidity in the banking sector at desirable levels consistent with inflation forecast and adding that monetary policy targets for the quarter ending September 2022 were successfully met.

“The performance of the economy was on track. Growth in Mainland Tanzania was 5.2 per cent in the first half of 2022, and the likelihood of realizing the projected growth of 4.7 per cent for the whole year is high. Likewise, the Zanzibar economy grew at 5.8 per cent in the first half of 2022, consistent with the projection of 5.4 per cent for 2022. The economy is forecast to grow faster in 2023 than in the preceding year, as the spillover effects of the global shocks fade away,” the statement said.

The statement noted that inflation remained moderate, slowly rising due to increase in prices of food and energy.

“In Mainland Tanzania, it reached 4.9 per cent in October 2022, up from 3.8 per cent in July 2021, but was consistent with the target of 5.4 percent for 2022/23. In Zanzibar, inflation rose to 7.3 per cent from 2.2 per cent, also broadly in line with the target of 5 percent. Inflation is forecast to remain moderate and consistent with the target in 2022/23,” it added.

Money supply and private sector credit growth was on course with money supply (M3) growing by 13.4 per cent in October 2022, broadly consistent with the target of 10.3 per cent for 2022/23.

Private sector credit growth was high in September and October 2022, at 22 and 23.7 percent, respectively.

The MPC statement further noted that the performance of the banking sector performance was satisfactory as it remained liquid, capitalized, and profitable.

“Likewise, deposits and assets are increasing, and assets quality is improving. The non-performing loan ratio declined to 7.2 percent in October 2022, down from 8.3 percent in the corresponding period in 2021,” it added.