TANZANIA is among the three East African countries whose economies grew strongly in 2015 despite the overall slowdown in economic activities in Sub-Saharan Africa.
According to the Word Bank’s latest analysis of Africa’s economic trends, Africa’s Pulse, Gross Domestic Product growth in Sub-Saharan Africa averaged three per cent, down from 4.5 per cent in 2014.
“The deceleration in growth was due to low commodity prices, weak growth in major trading partners, rising borrowing costs and adverse domestic developments in many countries,” says the 64-page report, forecasting the region’s 2016 growth at 3.3 per cent.Tanzania, Kenya and Rwanda and most oil-importing countries saw their economies remaining buoyant, helped by infrastructure spending, strong consumer demand and a growing service sector.
“Tanzania registered strong growth, underpinned by expansion in construction and service sectors,” said the report. The plunge in commodity prices, particularly oil, which fell by 67 per cent from June 2014 to December 2015, and weak global growth in emerging markets, contributed to the region’s lacklustre performance.
The fall in commodity prices represented a significant shock for the region because the large share of commodities in exports -- fuels, ore and metals account for over 60 per cent of the region’s exports compared with 16 and 10 per cent for manufactured goods and agricultural products, respectively.
“In several instances, the adverse impact of lower commodity prices was compounded by domestic conditions like electricity shortages, policy uncertainty, drought, and security threats, which stymied growth,” said the analysis team leader, Punam Chuhan-Pole, while presenting the report from Washington through a video conference on Monday evening.
She said external environment confronting the region was likely to remain difficult, citing weak policy buffers in some countries.“As countries adjust to a more challenging global environment, stronger efforts to increase domestic resource mobilisation will be needed,” said World Bank’s Vice-President for Africa, Mr Makhtar Diop.
The projected pickup in activity in 2017-2018 reflects a gradual improvement in the region’s largest economies – Angola, Nigeria, and South Africa – as commodity prices stabilise and growth-enhancing reforms are implemented.
The analysis further shows potentials in rapid urbanisation as the engine of economic growth.
“Urbanisation and well managed cities provide a major opportunity to offer a springboard for diversification,” reads the report. The growth of cities, if well managed, can spur economic growth and productivity.
But African cities are currently suffering from high housing and transport costs, in addition to high cost of food that takes up a large share of urban household budgets. African cities, according to the analysis, are costly for households, workers and businesses.
“The high costs make cities less livable... they also constrain the region’s economy.”