NAIROBI (Reuters) – Tanzania’s economy will grow 5.8% in 2020 compared with an estimated 5.6% this year, and growth will rise to 6.1% in 2021, the World Bank said on Tuesday.
The World Bank’s 2019 forecast is lower than the government estimate of 7.1%, the second time this year its estimates have differed sharply from the government’s.
“World Bank staff estimates … suggest that real GDP growth in 2019 will be 5.6%, up from 5.4% in 2018,” the World Bank said in its Economic Update on Tanzania.
President John Magufuli’s government has invested billions of dollars in an ambitious industrialization drive that includes construction of a new rail line, revival of the national airline and a hydro-power plant.
But state intervention in sectors such as mining and agriculture has led to a drop in foreign investment in East Africa’s third-largest economy.
“Despite the recent recovery in exports, inflows are still lower than historical averages,” the World Bank said, adding that foreign direct investment had dropped by one-third, to $1.0 billion from $1.5 billion, between 2015 and 2018.
The government says the economy expanded by 6.9% in the first half of 2019 compared with 6.8% the previous year, driven by high public investment and exports, the bank said.
Finance Minister Philip Mpango told lawmakers in June that the economy would grow by 7.1% in 2019, up from 7.0% in 2018.
In July, the World Bank put Tanzania’s 2018 growth at 5.2%.
The International Monetary Fund has also reported lower economic growth figures than the Tanzanian government this year.
In April, the IMF said “unpredictable and interventionist” policies were undermining growth, according to a leaked report seen by Reuters.
The World Bank warned on Tuesday that spending pressures expected as a result of next year’s elections mean the country needs to strengthen its fiscal management.
“Revenue forecasting is weak, undermining budget credibility and resulting in accumulation of arrears and commercial domestic debt,” the bank said in its report.
The fiscal deficit has widened to 3.2% in 2018/19 from 1.9% of GDP in 2017/18, it added.
“The ambitious revenue target of 17.1 percent of GDP (in the previous fiscal year 14.0 percent was actually collected) and the higher budgeted spending may make it difficult to achieve the fiscal deficit goal of 2.3 percent of GDP in 2019/20,” the bank said.
(Reporting by Nairobi Newsroom; Editing by Catherine Evans)