IMF sees Tanzania growth at 5.9pc despite Middle East spillovers

Tanzania's economic resilience is being tested as the International Monetary Fund forecasts 5.9% growth for 2025, even as Middle East tensions threaten global supply chains and commodity prices. The projection reflects cautious optimism about East Africa's second-largest economy, though geopolitical headwinds loom larger than domestic constraints.

## Why is Tanzania's 5.9% growth forecast significant for investors?

For context, Tanzania has consistently outpaced sub-Saharan African growth averages over the past decade, averaging 4-5% annually. The IMF's 5.9% forecast places it among Africa's faster-growing economies, ahead of regional peers Kenya and Uganda. This growth is anchored in strong domestic demand, agricultural productivity, and expanding mining operations—sectors less vulnerable to external shocks than trade-dependent economies. For investors seeking exposure to East African growth without the volatility of commodity-dependent states, Tanzania's diversified base offers relative stability.

However, the IMF's cautious tone signals vulnerability. Middle East escalation could disrupt global shipping routes through the Red Sea, raising freight costs for Tanzania's imports and lengthening export timelines for agricultural goods and minerals. Energy prices, already volatile, could spike further, pressuring Tanzania's import bill and widening the current account deficit. The country imports roughly 25% of its energy needs, making it sensitive to crude price swings.

## What sectors will drive Tanzania's 2025 growth?

Agriculture remains the backbone, employing 65% of the rural workforce and accounting for 23% of GDP. Recent harvests have been solid, and regional demand for Tanzanian maize, cashews, and coffee remains robust. Mining—particularly gold, tanzanite, and rare earths—is the second engine. Gold exports typically fetch $1.5–2 billion annually and are less cyclical than many commodities in 2025, given central bank demand in developed markets. Manufacturing and services, especially tourism and telecommunications, are expanding but remain underpenetrated relative to regional peers.

Financial services are accelerating. Tanzania's banking sector has grown 12% year-over-year, and mobile money penetration now exceeds 40% of the population. Infrastructure investment—ports, roads, railways—continues to unlock productivity gains, though execution remains inconsistent.

## How exposed is Tanzania to Middle East spillovers?

Direct exposure is limited; Tanzania has minimal trade ties to Iran, Saudi Arabia, or Israel. Indirect exposure is the real concern. A sustained spike in shipping costs would inflate import prices for fuel, machinery, and spare parts—all critical for construction, agriculture, and manufacturing. Prolonged uncertainty could also deter foreign direct investment, especially in capital-intensive sectors like energy and mining. Tanzania attracted $1.3 billion in FDI in 2023; a geopolitical premium on risk could reduce this by 10–15%.

Oil markets are the transmission channel. While Tanzania is not an importer of crude, refined products represent 8–10% of total imports. A 20% crude spike (realistic if Middle East tensions escalate) would add $200–250 million to Tanzania's annual import bill—a material headwind for a country managing tight fiscal space.

## What should investors watch in 2025?

Central bank policy, inflation trajectory (currently 3.5%), and the shilling's stability are front-line indicators. Currency weakness typically amplifies import costs and erodes real returns for foreign investors. Second, monitor agricultural output; two consecutive poor harvests would trigger food inflation and pressure growth below the IMF forecast. Finally, track mining export volumes and prices—any sharp decline would undermine the 5.9% target significantly.

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