Economic growth in the January-June 2018 period was driven by manufacturing, construction, transport and communication sectors.
"The annual headline inflation rate fell to 3.0 per cent in November from 3.2 per cent in October, which is the lowest level reached in over 10 years," the country’s Statistician General, Dr Albina Chuwa, told the Financial Times.
The decline in the country’s inflation rate was underpinned by slower rises in food prices, she said.
In a presentation at a meeting between the Tanzania Revenue Authority (TRA) and regional commissioners, which was attended by President John Magufuli in Dar es Salaam on Monday this week, Dr Chuwa allayed fear that the low inflation rate could stifle economic growth.
"The 3.0 per cent inflation rate does not pose any negative systemic risks to the country’s economic expansion," she said.
The government expects the economy to grow 7.2 per cent in 2018 and accelerate to 7.3 per cent next year, despite a slowdown in credit to the private sector and rising bad loans in the banking sector.
The International Monetary Fund (IMF) warned last week that a credit squeeze coupled with a slowdown in government spending could dampen prospects for faster economic growth in Tanzania.
"More recently, several indicators point to slower momentum which, combined with other risks, could complicate the outlook,” the IMF said in its latest financial system stability assessment for Tanzania.
“Constraints in implementing public investments and weak expenditure controls have led to an increase in fiscal arrears."
The global lender warned that nearly half of Tanzania's 45 banks were vulnerable to adverse shocks and risk insolvency.
The government plans to raise its spending by 2.4 per cent in the 2018/19 fiscal year to around 32.5 trillion shillings, with the fiscal deficit expected to increase on the back of higher infrastructure spending.
The fiscal deficit is seen reaching 3.2 percent of gross domestic product in the 2018/19 fiscal year (July-June), up from around 2.1 percent in 2017/18.
However, the Minister for Finance and Planning, Dr Philip Mpango, warned on Monday that implementation of development projects could be undermined by delays in receipt of financial assistance from some development partners.
According to the IMF, a deteriorating business environment and delays in addressing key infrastructure bottlenecks could slow down economic growth going forward.
“A poor business environment would discourage private sector investment, with adverse impact on economic activity,” the IMF warned.
“Development of infrastructure is crucial for reducing costs, attracting investment in the real sector and sustaining growth. Slow execution of infrastructure spending in such an environment would have a negative impact on overall investment and growth.”
President Magufuli has instructed his government to improve the investment climate in the country and remove business constraints.
Investors have long complained that bureaucracy, multiplicity of taxes, costly and unreliable electricity, corruption and regulatory uncertainty were among key obstacles to business in Tanzania.