DAR ES SALAAM - The Tanzanian economy has remained relatively stable as per the Bank of Tanzania (BoT), monthly economic bulletin of the month of July 2023.
Global Economic Situation
The global economic outlook remains optimistic despite the downside risks. Many economies continue to experience gradual recovery from the effects of the COVID-19 pandemic and the war in Ukraine, with increased consumer spending, investment, and trade. Geopolitical tensions, trade disputes, and financial sector vulnerability continue to pose risks to global economic stability, adding uncertainties to businesses and investors. Long-term sustainable growth will also be at risk from ongoing structural issues such as climate change, income inequality, and technological disruptions.
The global economy is projected to improve to 3 percent in 2024. Inflation continued to fall consistent with the decline in commodity prices in the world market and monetary policy tightening but remained above targets in many countries. In line with this trend, global inflation is expected to decline to 7 percent in 2023 from 8.7 percent in the previous year. Prices of most commodities in the world market were higher in April 2023 than in the preceding month. Crude oil price increased to USD 82.46 per barrel from USD 76.47 per barrel in March 2023, following the OPEC+ announcement of further oil output cuts. The price of gold also rose by 4.6 percent to USD 1,999.77 per troy ounce owing to high demand following the weakening of the US dollar, which shifted the demand for equity and treasury securities towards gold. The pace of global growth is on the rise, surpassing last year's rate, coupled with expectations of reduced commodity prices and inflation. Advanced economies are anticipated to take a more moderate stance on monetary tightening than in the past year. Concerns over banking instability in the US and Europe have largely subsided, thanks to early liquidity interventions and the takeover of struggling banks. This improved global situation offers a promising outlook for Tanzania's economy, particularly in addressing current account imbalances and foreign exchange constraints.
Inflation
For the fifth consecutive month, headline inflation has maintained a consistent easing trend. Headline inflation eased to 3.6 percent in June 2023 down from 4 percent in the preceding month, primarily attributed to an easing in the prices of both food and non-food commodities, aligning with the overall decrease in the prices of consumer goods in the global market. The rate was also within the country’s target, as well as East African Community (EAC) and Southern African Development Community (SADC) convergence criteria.
Inflation is projected to remain on a downward trend and within the range of 3-5 percent, attributable to several factors, including a favorable base effect as moderation of consumer goods prices continues after peaking in 2022, easing inflationary pressures from trading partners, satisfactory food supply, and implementation of prudent monetary policy.
Food Inflation
Food inflation, including non-alcoholic beverages, decreased to 7.8 percent in June 2023 from 8.5 percent in the preceding month but was higher than 5.9 percent in a similar month in 2022. Average prices of most major food crops remained higher than in the corresponding period in 2022 due to high demand from neighboring countries. On a monthly basis, all major food crops recorded price easing, except finger millets and round potatoes, reflecting ongoing harvests.
To ensure food availability and stability in food prices, the National Food Reserve Agency (NFRA) continued to supply food to councils facing shortages at subsidized prices. As a result, the stock of food reserves held by NFRA declined to 46,665 tonnes at the end of June 2023 following the sale of 6,192 tonnes of cereals against purchases of 1,719 tonnes.
Domestic pump prices eased further in line with the decrease in energy prices in the global market. As a result, energy inflation, especially within the fuel and utilities subgroup, was lower than in the corresponding month in 2022.
Core inflation remained on a downward movement for the ninth consecutive month, recording 1.7 percent in June 2023, compared with 2 percent and 3.4 percent in the previous month and the corresponding month, respectively.