Tanzania’s real household spending is expected to grow by 5.3% in 2022, accelerating from the estimated growth of 4.9% in 2021, according to Fitch Solutions.

With such a robust growth, total household spending (in nominal terms) will reach TZS104.7 trillion (US$45.3 billion) in 2022, increasing from TZS96.4 trillion (US$41.2 billion) in 2021.

This growth forecast in consumer spending aligns with Fitch’s growth forecast for the Tanzanian economy at a real rate of 5.5% over 2022, with private consumption and elevated development spending being key growth drivers amid limited lockdown restrictions.

Closely linked with Tanzania’s economic growth is its unemployment levels. Fitch forecasts that unemployment (as a percentage of total labour force) will average 2.4% in 2022, decreasing from 2.6% in 2021 as economic activity increases.

Tanzania’s tourism sector has been negatively impacted by COVID-19 pandemic related travel restrictions. In 2022, Fitch forecasts tourist arrivals will grow by 59.9%. However, this growth is from a low base following an estimated 71.3% contraction in tourist arrivals in 2020.

“We believe that the rollout of vaccines and the easing of restrictions for inbound tourists is key for the recovery of the country’s tourism sector. The positive growth in tourist arrivals in 2021 and 2022 bodes well for hospitality businesses such as restaurants, hotels and recreation and culture establishments”.
Fitch Solutions

Risks to Outlook

In H2 2021, inflationary pressures rise in many countries globally as base effects, high commodity prices and supply-chain bottlenecks created localized shortages. As a result, Fitch believes that rising consumer price inflation is a key risk to consumer spending over the remainder of 2021, as it has the potential to erode purchasing power.

While the consumer price inflation has been relatively stable over 2021, recorded at 4.1% year-on-year in November 2021, this is an uptick when compared to the 3% year-on-year that was recorded in November 2020.

“Our Country Risk team forecasts Tanzania’s consumer price inflation to average 3.2% in 2022 which is lower than the 2021 estimate of 3.7%. Nevertheless, we do not expect this level of inflation to significantly impact our 2022 consumer spending outlook”.
Fitch Solutions

With economies reopening, consumers are demanding products that they had little access to over the previous year. However, manufacturers are facing several problems. Supply chain issues and bottlenecks are resulting in consumer goods shortages, feeding through into supply-side inflation.

From a global perspective, a marked recovery in consumer spending depends on the ability of authorities to vaccinate a large enough proportion of their populations and thereby a notable drop in Covid-19 infections and hospitalization rates.

Both these factors will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales, Fitch said.

As of December 28, 2021, 3.4% of people in Tanzania had received at least one vaccine dose. This is significantly below the Africa average, which stands at 14.0%.

Though the vaccination rate is lower than the Africa average, Fitch believes that a successful vaccination roll out will aid the recovery of consumer spending over coming quarters.

Fitch noted that its forecasts account for risks that are highly likely to play out in 2022, including the easing of government support. However, there are risks to the outlook that if they do start to play out, will lead to forecast revisions, Fitch said.