Following two decades of sustained growth, Tanzania reached an important milestone in July 2020, when it formally graduated to lower-middle-income country status. However, the global COVID-19 pandemic has significantly slowed economic growth, adversely affecting lives and livelihoods of Tanzanians, and requiring bold policy actions to ensure that Tanzania's LMIC status is maintained.
The 15th Tanzania Economic Update, Raising the Bar: Achieving Tanzania's Development Vision takes Tanzania's recent achievement of LMIC status as a point of departure, looking forward to what it will take to achieve the goals of the Tanzania Development Vision (TDV) 2025.
"Tanzania's sustained economic expansion in recent years has supported improvements in overall living standards," said Mara Warwick, World Bank's Country Director for Tanzania, Malawi, Zambia and Zimbabwe. "However, there is an important opportunity for the country to raise its own bar, providing greater opportunities and economic security for the large proportion of Tanzanians still living in poverty amidst serious impacts from the global COVID-19 pandemic. Realizing the goals of TDV 2025 will require a concerted effort to restore the economy's growth momentum while expanding access to economic opportunities."
The economic update notes that while Tanzania avoided a recession in 2020, economic growth decelerated to an estimated 2.0 percent. The poverty rate is estimated to have risen to 27.2 percent, and the report warns that the loss of income could have pushed an additional 600,000 Tanzanians below the national poverty line, most of them households that rely on self-employment and informal microenterprises in urban areas.
The report highlights high uncertainty of the country's economic outlook. Real gross domestic product is projected to grow in 2021 in the range of 3.0 to 5.3 percent, with realization on the upper side of this range hinging on a strong recovery in global economic activity supported by the world-wide rollout of COVID-19 vaccines, and sound domestic policies to foster a sustainable recovery.
"Increasing the availability and quality of information on both the domestic spread of COVID-19 and the evolution of macroeconomic indicators would strengthen the government's ability to plan and implement effective policies to foster economic recovery and support all Tanzanians," Warwick said.
The economic update argues that the attainment of LMIC status offers an opportunity for the country to assess the quality of past growth in delivering broad welfare gains and to develop a roadmap to guide its further transition to a successful middle-income economy with a high level of human capital development, high-quality livelihood opportunities, and broad gains in living standards, as outlined in TDV 2025.
The report frames Tanzania's 'next leap' of development around three strategic pillars: sustaining robust medium-term growth in a challenging external environment, improving the inclusiveness of growth and its impact on poverty reduction, and fostering upward economic mobility and strengthening economic security. These three pillars reflect both the lessons of international experience and Tanzania's unique circumstances and form the basis for an actionable policy agenda to achieve the goals of the TDV 2025. This strategic framing is also timely as the country prepares its next Five-Year Development Plan.
"Human capital investments enable households at all income levels to access economic opportunities and benefit from growth. This is critical to ensure that all Tanzanians have opportunities throughout their lives to move to more productive economic sectors and improve their lives and those of their families," said Bill Battaile, World Bank Lead Economist for Tanzania.
