REBOUNDING external demand in the wake of the pandemic has supported the recovery of Tanzanian exports, which has been somewhat slower that the recoveries observed in some comparable countries but is still broadly consistent with regional trends.
The export growth remained strong during the first nine months last, year with goods and services exports increasing by 26 per cent (y/y).
According to the World Bank (WB) report on Tanzania Economic Updates, the dramatic recovery of services exports drove the growth of overall exports.
Services exports expanded by 63 per cent (y/y) during the nine months last year to almost 3.5 billion US dollars up sharply from 2.1 billion US dollars recorded during the same period last year.
Services represented about two-thirds of the total increase in exports over the period led by travel and transportation related services.
At about 1.8 billion US dollars travel receipts approached their pre-pandemic average over the nine months last year supported by a 66 per cent (y/y) increase in tourism arrivals.
Thus far, most tourists have arrived from other East African countries. In 2021, Russia was the second-largest source of tourist arrivals after Kenya, but the Russian invasion of Ukraine caused arrivals from Russia to plunge by 93 per cent (y/y) during the nine months last year.
Meanwhile, freight transport and related services expanded by 33 per cent (y/y) to reach 1.4 billion US dollars up from 1.1 billion US dollars during the nine months in the preceding year.
Amid the ongoing Russian invasion of Ukraine, surging European demand for coal to compensate for the loss of Russian oil and gas has greatly increased port activity in Tanzania.
Manufactured goods which represent about 20 per cent of total exports have led the recovery, rising by 36 per cent (y/y) in nine months last year after expanding by 31 per cent during the nine months in the preceding year.
The growth of minerals exports which account for roughly half of total goods exports turned slightly positive during the nine months last year after contracting during the same period last year.
Traditional exports which represent about 10 per cent of goods exports also showed signs of a sustained recovery.
Overall, favorable prices for major export items drove an 8.8 per cent (y/y) increase in goods exports in the nine months last year up from 6.7 per cent in the same period last year.
Despite a double digit recovery in exports, rapid import growth has continued to widen the current account deficit which expanded from 1.3 billion US dollars (3.7 per cent of GDP) in the first half of 2021 to 2.3 billion US dollars (5.9 per cent of GDP) in the first half of 2022.
As the domestic economy recovered from the shock of the pandemic, Tanzania’s terms of trade fell by 34 per cent from their April 2020 peak, putting pressure on the external accounts.
The WB report said the increasingly unfavorable global economic conditions have been creating considerable headwinds for Tanzania’s import-dependent economy.
Amid lingering pandemic related economic fatigue, Tanzania now faces the disruptive effect of the Russian invasion of Ukraine, combined with multiple adverse external trends.
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