Tanzania’s economic outlook for 2022 revised

Tanzania is facing increased inflation pressures that have seen both the World Bank and IMF revise their economic projections for the year. Gabriel Mwangonda, Managing Director of SEGAX Group Limited, shed light on the current economic landscape during an interview with CNBC Africa. The key theme of the conversation revolved around the impact of inflation on Tanzania's economic outlook for 2022. Mwangonda highlighted the significance of the traditional sectors, particularly agribusiness and mining, in driving economic growth. Despite initial projections of growth, external factors such as the war between Ukraine and Russia and disruptions in the global supply chain have led to a downgrade in growth forecasts. The World Bank projects a growth range of 4.5 to 5.5, while the IMF expects a growth rate of 4.8 for Tanzania's economy. However, Tanzania's central bank maintains a projection of 5.2, staying within the World Bank's forecast. The tourism sector, another key player in the country's economy, has shown promising signs of recovery. With an 87% growth last year, the sector is expected to return to pre-COVID levels by the end of the year. Tanzania hopes that the tourism sector will continue to thrive and contribute significantly to its foreign exchange earnings alongside the mining sector. However, the recent Ukraine-Russia conflict has had a ripple effect on Tanzania, particularly in terms of inflation. The disruption in the global supply chain has resulted in challenges related to access to essential products like wheat and petroleum. Tanzania heavily relies on wheat imports from Ukraine, and the increase in prices has posed significant challenges. The rise in global fuel prices, coupled with supply constraints, has led to unprecedented inflation levels in the country. The cost of living has surged, with impacts felt across various sectors, including food and transportation. The government has implemented measures such as reducing taxes on petroleum products and promoting the use of compressed natural gas (CNG) to mitigate the inflation impact. By encouraging the use of locally produced CNG, the government aims to offer a cost-effective alternative to traditional fuel sources. Initiatives like converting vehicles to CNG usage and promoting CNG in industries demonstrate Tanzania's commitment to managing inflation and ensuring economic stability. While challenges persist, Tanzania remains optimistic about its ability to weather the inflation storm and steer its economy towards sustainable growth.