TANZANIA MOVES UP IN WORLD BANK'S RANKING OF COUNTRIES BY GDP

Minister for Finance and Economic Affairs, Ms Saada Mkuya Salum, announced in Dar es Salaam at the weekend that the size of the economy had expanded by 32 per cent to 70 trillion/- (about 43.8 billion US dollars) from the previous 53tri/- (33.3 billion US dollars) after changing the base year for calculations from 2001 to 2007.

Tanzania, the East African second largest economy now occupies 89th position up from 93rd in the World Bank’s ranking of countries by GPD. Tanzania has become the latest African country to rebase its economy after Nigeria and Kenya. Nigeria overtook South Africa to become Africa’s biggest economy earlier this year.

The revision in the estimates has captured structural changes in the economy since 2001 including the on-going mobile phone revolution in the country. But economists have given a cautious welcome to the new estimates saying despite the positive outcomes of the exercise, challenges of the growing economy remained unchanged.

They cautioned that an increase in GDP figures did not necessarily mean that Tanzanians would be better off nor did it imply that the existing social economic challenges have ceased to exist. “So many things have not changed.

The decline in poverty levels are only modest, inclusiveness of growth is still a challenge and unemployment problem increases,” Prof Humphrey Moshi of University of Dar es Salaam told the ‘Business Standard’ in an interview.

He said there was still a big challenge in sharing of the national wealth as income gap continued to widen and the number of poor people was increasing due to a population boom.

The growth of the economy was not sufficiently broad-based and poverty levels still remain high because the fastest growing sectors were relatively capital-intensive creating a limited number of jobs, he said. Tanzania is currently the fast growing economy in the East African region after achieving a seven per cent rate of growth last year.

The economy is projected to grow by 7.2 per cent this year and continue growing at an annual average of 7.7 in the medium term.

The revised GDP estimates puts growth rate in 2003 to 7.3 per cent. Prof Moshi said the government needed to take deliberate measures to give more support to the agriculture and manufacturing sectors so as to boost more inclusive growth in Tanzania.

Agriculture, the backbone of the economy in Tanzania accounts for about one fifth of the foreign earnings and supports the livelihoods of more than two thirds of the population.

He said the government needed to focus more on structural transformation of the economy to support growth of industries and the manufacturing sector to provide a linkage with the agricultural sector.

The new estimates of the economy would have reflected the reality in the ground if it had captured the fast growing informal sector, he said.

“Rebasing only without looking at paradoxies of growth is playing with statistics… it is a wishful thinking… it becomes an imagined economy,” he said.

Dr Honest Ngowi, an economist of the Mzumbe University told the ‘Business Standard’ that the new estimates of the economy indicated the country was richer compared to previous estimates which improves its financial rankings and helping to boost investors’ confidence in the country.

“The country looks richer with an increase in GDP and GDP per capita but there are statistics on one side and reality on the ground on another side,” he said. He said the new estimates would not reflect the reality if they were not adjusted to inflation as they will provide nominal instead of real terms of the economy.

“The new estimates are good news to the country but it must be in real terms. If it provides nominal terms then it is a game of numbers,” he said. Dr Ngowi said the government should focus on increasing productivity particularly in agriculture and manufacturing sectors to foster a more inclusive growth.

He said todate the government had not implemented Maputo declaration of increasing investments in agriculture to 10 per cent of the annual budget. Bank of Tanzania’s (BOT) Director of Economic Research, Dr Joseph Masawe told the ‘Business Standard’ the revised estimates for 2007 was 26.7tr/- which is 27.8 per cent higher than 20.9tr/- for the same year in the old series.

He said the revised GDP figure for 2013 was 69.97tr/- which is 31.6 per cent higher that 53tr/- for the same year by using 2001 as a base year.

He, however, cautioned that the new estimates did not mean that the economy had changed but it was only meant to give a clearer picture of its size.

“It is important to note that this does not mean that the actual GDP of Tanzania has changed. It only means that it has been measured more accurately and thus, what we know about it has become more accurate,” he said.

Business Standard