According to a recent report by Fitch, Tanzania’s economy is poised for robust growth, which will contribute to higher consumer spending throughout the year. The positive outlook is supported by several key factors, including strong economic performance, low inflation, and a stable labour market.
Economic growth in Tanzania is expected to accelerate, with real GDP projected to increase by 5.7% year-on-year in 2023, up from 5.3% in 2022. This growth will be driven by investments in large-scale infrastructure projects, resulting in increased wages and elevated consumer consumption. Additionally, the agricultural sector will benefit from lower-cost credit, further boosting consumer activity.
The report also highlights the easing of inflationary pressures in Tanzania. After reaching a high of 4.9% year-on-year in January 2023, inflation has gradually declined and is expected to average 4.1% for the year, ending at 3.7%. This decline in inflation will enhance consumer spending power and instil greater confidence in businesses and investors.
Furthermore, unemployment levels in Tanzania are anticipated to remain low, thanks to the implementation of major infrastructure projects and government support in the agricultural sector—the forecasted unemployment rate for 2023 stands at just 2.3% of the total labour force.
However, there are potential challenges on the horizon. The Bank of Tanzania is expected to increase its policy rate in the near future, making debt servicing more expensive. This adjustment, coupled with a slightly less favourable outlook for the Tanzanian shilling, may pose some headwinds to the overall forecast.
Despite these challenges, consumer spending in Tanzania is predicted to grow positively. Real household spending is projected to increase by 4.0% year-on-year in 2023, driven by rising wages, low unemployment, and the easing of inflation. This growth will translate to a total household spending of TZS52.87 trillion in 2023, compared to TZS50.8 trillion in 2022.
As Tanzania’s economy continues to thrive, supported by favourable economic conditions and policies, consumers can look forward to increased purchasing power and improved livelihoods in the coming year.
Source : BusinessInsiderAfrica