First quarter economy slows down, affects real GDP

10Sep 2016
Victor Karega
The Guardian
First quarter economy slows down, affects real GDP

THE Tanzanian economy slowed in the first quarter of 2016, growing slightly by 5.5 per cent compared to the 5.7 per cent growth registered in the first quarter of 2015.

Electricity production in the first half of 2016 rose by 14.5 per cent to 3454.2 million kWh compared with 3,016.7 million kWh generated in the same period in 2015 following completion of a 542 km long gas pipeline from Mtwara to Lindi and the 150MW Kinyerezi I power plant project.

Therefore, real gross domestic product (GDP) fell by 0.2 per cent in the first quarter, according to data from the Bank of Tanzania (BoT).

The internal environmental and activities that contributed to the growth during the quarter, include agriculture (11.7 per cent), trade (10.6 per cent), transport (10.1 per cent), finance (10.1 per cent) and communications (10.0 per cent).

The domestic sectors also lost some momentum, as the weak global outlook with increasing downside risks affected local economic sentiment.

Economic activities that grew in first quarter of 2016 were currency (13.5 per cent), communications (13.4 per cent) and public administration (10.2 per cent).

“The sharp decline of economic growth to 5.5 per cent from 5.7 per cent is a normal thing that had happened in past years. For example, we see that the economy grew by 5.9 per cent in the second quarter of 2015 compared with growth of 10.1 per cent in the preceding quarter of 2014.

This trend did not mean that the full year of 2015 was worse than 2014. Rather, we see that the economy grew by 7.0 per cent in 2015 similar to the growth of 2014,” said BoT.

Differences in quarterly are not effective indicator of economic trends throughout the year.

Tanzania’s economy is projected to grow 7.2 per cent in the 2016/17 financial year according to the budget estimates released in June.

Looking ahead, the Central Bank noted that through various indicators the economic situation continues to improve this year. For example, electricity production in the first half of 2016 rose by 14.5 per cent to 3454.2 million kWh compared with 3,016.7 million kWh generated in the same period in 2015.

This increase was largely due to government efforts in using natural gas to produce electricity following completion of a 542 km long gas pipeline from Mtwara to Lindi and the 150MW Kinyerezi I power plant project.

In the same period, electricity production using natural gas also increased by 52.2 per cent. This would boost industrial production and other sectors dependent on energy, thereby contributing to the increase in GDP.

Strong headwinds in the external environment persisted in the first quarter, weighing heavily on global trade flows.

Heightened financial market volatility and the uncertainty arising from the monetary policy actions by major central banks also added downward pressures.

Top Stories