Tanzanian GDP is 28 per cent larger- sources

THE TANZANIAN economy is  larger than previously estimated, we can authoritatively report. The rebasing exercise, whose results are yet to be released, found that the economy was more than 27 per cent larger by the close of 2013.

Two weeks ago, this publication estimated Tanzania’s GDP to be higher than US$33 billion previously estimated. Now the actual size has been found to be almost 28 per cent higher. This puts the GDP at the end of last year to US$42.51 billion at the January’s exchange rate.

Re-basing of the national account series (which includes the GDP) is the process of replacing an old base year with a new and more recent base year. The base year provides the reference point to which future values of the GDP are compared.

Re-basing is meant to reflect recent developments in the economy and expand the basket of consumer goods to reflect changing tastes and preferences. Consequently, countries re-base their economy once in a decade although the UN recommends that re-basing be done every five years.

The structure of the Tanzania has changed dramatically since 2001 with new industries coming up especially in the mining sector. The services sector has also posted tremendous, discernible growth with the telecommunications sectors growing from an estimated 500,000 telephone lines in 2001 to nearly 28 million as at the end of March 2014.

 In 2001 internet communication was through cyber cafes and was expensive. To date internet is available on the majority of handsets. There was no mobile money transfer then, now it is diffuse.

Although there were some LNG resources at Sonko sonko, they were not fully exploited and the quantity of LNG available in Tanzania is estimated at 53tcf.

Concomitant with the elevation of GDP will be the rise in GDP per capita which will see the country move closer to achieving its target of being a middle income economy by 2020. Estimates based on the 2012 census place the population of Tanzania at 47 million. This works to a GDP per capita $904 compared to $708 in the current estimates.

 What are the implications of a larger GDP?  Several things come to mind. Among these is that Tanzania has to take a hard look at her taxation policy.  According to the current budget estimates, domestic revenue was expected generate US$7.4 billion, that is 65 per cent of the US$12 billion national budget estimates. Going by the same rates, that is 22.3 per cent of the lower GDP, then Tanzania should raise some US$9.46 billion from domestic revenue which is 79 per cent of the budget. In fact, Tanzania which is currently suffering withdrawal of donor support, can comfortably bridge the gap from domestic taxes.
  
The new larger economy means that Tanzania must start thinking big and invest big to support the larger economy.  She has to start investing in infrastructure, especially transport in order to support increased economic activity. Top on the agenda should be investment on the central corridor.
A report by the Africa Development Bank shows that the central corridor is scantly used due to the fact that much of it is not paved. 

 Consequently, average annual daily traffic on large sections of this corridor is less than 1000 vehicles only 40 per cent of the corridor boasts of an AADT of more than 1000 vehicles.  This compares negatively with the traffic population on the Northern Corridor where AADT is 3000.

The implication is that investment is needed on this corridor to make it a viable route. And now that Tanzania is investing in Bagamoyo Port, Investment in roads and Highways is urgent. Without these, investment in Bagamoyo port will be a white elephant.

With the rebased GDP, we expected the quarterly and annual growth rates to change. Economists say they will not be surprised if Tanzania has been posting double digit growth for a while now. A larger economy demands lots of support investments to keep it growing. Among these is the nation debt –GDP ratio.

 The national debt to GDP ratio which by end of April stood at US$17.853, say the Central Bank of Tanzania.  At the old estimates this amount of debt was the equivalent of 53 per cent of GDP.

 A debt ratio higher the 50 per cent of one‘s income is considered irrational. However the new base year will trim the debt ratio to 42 per cent of GDP. Tanzania will thus be comfortable to borrow US$1 billion in the Eurobond market; she can even take more to finance her infrastructure development

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