Inflation in Tanzania remains low and stable, aligning with the national target of 5 percent. Photo: File
By Adonis Byemelwa
Global economic activity is on a steady upward trajectory in 2024, defying the ongoing challenges of geopolitical conflicts. According to the Bank of Tanzania (BoT) Monthly Economic Review for August 2024, the International Monetary Fund (IMF) has upheld its optimistic global growth projection of 3.2%.
Meanwhile, the World Bank anticipates a slightly more conservative 2.6% growth rate. This resilient performance amid global uncertainties underscores a robust economic environment, with Tanzania’s economy notably thriving and significantly contributing to this positive outlook.
However, the growth outlook remains positive, with observable disparities between countries and regions. Inflation has continued to decline across many advanced economies, hitting a three-year low. Central banks have eased the pace of monetary tightening, and financial conditions have improved globally. Although inflationary pressures from geopolitical uncertainties still linger, they remain moderate.
Domestically, Tanzania's economy continues to perform well, with national accounts data released by the National Bureau of Statistics indicating a 5.6 percent growth in the first quarter of 2024, up from 5 percent in the corresponding period of 2023. The key sectors driving this growth include construction, agriculture, and financial services.
Financial and insurance services, information and communication, and electricity emerged as the fastest-growing sectors of the economy. The outlook for 2024 remains optimistic, with a growth projection of 5.4 percent, largely driven by increased public and private sector investment alongside rising exports.
Inflation in Tanzania remains low and stable, aligning with both the national target of 5 percent and regional benchmarks set by the East African Community (EAC) and the Southern African Development Community (SADC). As of July 2024, headline inflation stood at 3 percent, down from 3.1 percent in June.
Core inflation also eased, reaching 3.3 percent in July, down from 3.6 percent the previous month. However, food inflation ticked up slightly to 1 percent from 0.9 percent in June, driven by rising retail prices for key staples such as maize, sorghum, potatoes, and millet.
The wholesale prices of rice and beans, however, saw declines in July, reflecting an improving supply-demand balance. In contrast, wheat prices showed a modest increase, while the National Food Reserve Agency reported a substantial increase in food stock to 368,855 tonnes, up from 340,479 tonnes in June. This stock boost was primarily attributed to purchases of maize and paddy, indicating that the country’s food security remains solid.
On the monetary policy front, the Bank of Tanzania's Monetary Policy Committee kept the Central Bank Rate steady at 6 percent for the quarter ending September 2024. The central bank continues to monitor liquidity levels closely, ensuring that the interbank rate remains within the targeted band. Despite these positive trends, domestic price adjustments due to global developments in oil prices may take some time to fully reflect in the local market.
The money supply has remained stable, with the M3 money stock showing consistent growth through mid-2024. Net foreign assets also showed positive trends, although the pace of growth slightly slowed in July compared to June. The overall picture indicates a strong performance in maintaining liquidity levels, ensuring price stability, and supporting economic growth in the face of global challenges.
While geopolitical conflicts pose moderate risks, the global economy continues its upward trajectory, with inflationary pressures easing and growth projections remaining largely on target. Tanzania’s economic performance, driven by strong sectoral growth and sound monetary policy, offers promising prospects for the rest of the year. The ability of both the global and domestic economies to navigate these challenges will largely depend on maintaining stability in key sectors and responding swiftly to emerging risks.