Is Tanzania’s economic growth an urban phenomenon?

Tanzania has been growing steadily over the past ten years and 2012 was no different. The economy expanded by 6.9 percent, which is close to the historical average. A look at national accounts reveals that five sectors contributed to almost 60 per cent of Tanzania’s economic growth between 2008 and 2012:

- Communication GDP almost doubled in less than four years, growing on average by over 20 per cent per year.
- Banking and financial services have expanded by 11 per cent per year since 2008.
- Retail trade increased by almost 40 percent between 2008 and 2012.
- Construction surged by an average of 9 percent per year over the same period.
- Manufacturing grew annually by 8.4 percent during the last four years.

Agriculture also contributed to economic growth as the result of its weight in national GDP (about one quarter). Its annual growth rate has nevertheless been systematically below the national average between 2008 and 2012. Fiscal policy also played a role with the annual expansion of government services in education and health exceeding seven percent over the past four years. Public administration expanded by only six percent per year between 2008 and 2012, which is considerably lower than in the early 2000s, when it expanded by over 10 per cent per year.
While the five sectors above have shown remarkable stability, fluctuations were observed in less influential sectors. For example, the mining sector has seen its performance varying between 1.2 per cent in 2009 and 7.8 per cent in 2012. Large variations were also depicted in the energy sector.

Interestingly, the five fastest growing sectors are concentrated in urban areas, thus making Tanzania's economic growth a predominantly urban phenomenon. This explains why Tanzania’s economic growth has not translated into significant reductions in poverty, since around eight out of 10 poor Tanzanians live in rural areas.

This analysis of the sources of economic growth in Tanzania raises the following questions:

- Will Tanzania’s growth continue to be concentrated into the same five sectors?
- To what extent have the current sources of growth increased the rural/urban divide? Will economic growth accelerate urbanization?
- What can be done to translate rapid and stable economic growth into improvements in quality of life and reduction in poverty?
- Will Tanzania’s economic performance remain relatively isolated from domestic and external shocks?

Source: National accounts from the Tanzania’s National Bureau of Statistics