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THE DOMESTIC ECONOMY
1. The Gross Domestic Product in real terms grew by 6.8 percent in 2005 compared to 6.7 percent in 2004. The increase in the growth rate was mainly attributed to an increase in the growth of whole sale and retail trade, hotels and restaurants (including tourism); mining and quarrying; manufacturing; construction; and transport and communication sectors. Likewise, the growth rates of electricity and water, financial and business services, public administration and other services sectors increased.
2. In 2005, Gross Domestic Product amounted to shs 13, 063,317 million at current prices or shs. 2,237,079 million at 1992 constant prices. The population of Tanzania Mainland was estimated at 36.2 million in 2005. The per capita income was shs. 360,865 in 2005 compared to shs. 319,754 in 2004 at current prices, equivalent to an increase of 12.9 percent. Furthermore per capita income, at 1992 constant prices was shs. 61,798 in 2005, compared to shs. 59,335 in 2004, equivalent to an increase of 4.2 percent.
3. The agriculture sector grew by 5.2 percent in 2005 compared to 5.8 percent in 2004. The decrease in the growth rate was due to a decline in production in the crop and livestock sub-sectors. The declined was from 6.0 and 4.8 percents in 2004 to 5.2 and 4.2 percents in 2005 respectively. Growth rates of fishing, forestry and hunting sub-sectors increased from 6.7 and 3.8 percents in 2004 to 7.3 and 4.5 percent in 2005 respectively. Despite the decline in the growth rate of agriculture sector, its contribution to GDP remained high compared to other sectors. In 2005, the agriculture sector contributed 45.6 percent to GDP compared to 46.3 percent in 2004.
4. The growth rate of manufacturing sector was 9.0 percent in 2005 compared to 8.6 percent in 2004. The growth was attributed to an increase in production in some industries particularly, cement, aluminium and iron sheets. The contribution of the sector to GDP increased from 8.8 percent in 2004 to 9.0 percent in 2005.
5. The growth rate of mining and quarrying sector increased from 15.4 percent in 2004 to 15.7 percent in 2005. The increase in the growth rate of the sector was attributed to new investments in Tulawaka gold mines in Biharamulo District. The contribution of the sector to GDP increased from 3.2 percent in 2004 to 3.5 percent in 2005.
6. The trade sector, which includes wholesale and retail trade, hotels and restaurants (tourism), grew by 8.2 percent in 2005 compared to 7.8 percent in 2004. The increase in the growth rate was mainly attributed to newly opened hotels and improved business environment. The contribution of the sector to GDP increased from 16.9 percent in 2004 to 17.2 percent in 2005.
7. In 2005, the growth rate of the construction sector was 11.9 percent compared to 10.8 percent in 2004. The growth of the sector was attributed to the increase in construction of residential and non residential buildings; roads and bridges; and land improvement. This sector contributed 5.7 percent to the overall GDP in 2005 compared to 5.4 percent in 2004.
8. In 2005, transport and communication sector grew by 6.4 percent compared to 6.0 percent in 2004. The growth rate was attributed to improvement in infrastructure for transportation and communication services, particularly telecommunication. Nonetheless, the sector’s contribution to GDP in 2005 remained at 5.4 percent, the same as in 2004.
9. The growth rate of electricity and water sector was 5.1 percent in 2005 compared to 4.5 percent in 2004. The growth in electricity and water sub sectors were from 4.7 and 2.8 percent in 2004 to 5.3 and 3.4 percent in 2005 respectively. The sector’s contribution to GDP remained at 1.6 percent as was in 2004 and 2003.
10. Finance and business services sector grew by 5.3 percent in 2005 compared to 4.4 percent in 2004. The increase in the growth rate was due to an increase in the growth of the finance and insurance; real estate; and business services sub-sectors at 5.7; 5.0; and 6.1 percents in 2005 compared to 4.4; 4.3; and 5.5 percents in 2004 respectively. However, the sector’s contribution to GDP declined from 9.7 percent in 2004 to 9.6 percent in 2005.
11. The growth rate of public administration and other services sector increased from 4.3 percent in 2004 to 5.1 percent in 2005. The increase in the growth rate of the sector was attributed to an increase in the growth rate of public administration sub-sector from 2.8 percent in 2004 to 4.7 percent in 2005. Education, health and other services sub-sectors grew by 6.3, 5.7, and 4.9 percent in 2005 compared to those attained in 2004 of 6.6, 6.0, and 5.8 percent respectively. The sector’s contribution to GDP declined slightly from 7.1 percent in 2004 to 7.0 percent in 2005.
Price Trends
12. The average rate of inflation in 2005 was 4.3 percent compared to 4.2 percent in 2004. The increase was attributed to rise in average prices of some food items, spurred by draught. The average prices of some non-food items also increased following an increase in the prices of petroleum products which in turn caused an increase in transportation and electricity costs.
13. In 2005, the food price index remained at 5.9 percent as was in 2004. However, the price indices of electricity, kerosene and water; transport; rent; health services; and beverage and cigarettes groups of goods and services were higher in 2005 compared to rates in 2004. The price indices for these groups of goods and services increased by 7.5; 4.7; 3.8; 3.4; and 2.1 percent in 2005 compared to 2.3; 1.0; 2.2; 0.5 and – 0.4 percent respectively. The price indices of clothing and footwear; recreation and entertainment; furniture and household utensils; and education groups of goods and services increased at a lower rate of 4.4; 1.4; 1.1 and 0.1 percent in 2005 compared to 5.1; 2.0; 0.2 and 0.6 percent in 2004 respectively. Despite lower rates of increase in the price indices, those goods and services contributed marginally in lowering the average rate of inflation because of their lower weights of 11.9 percent in the CPI basket. The price index for services and other household requirements increased by a lower rate of 0.4 percent in 2005 compared to 0.8 in 2004.
14. The price indices of goods and services consumed by various income groups revealed that, the higher income group has been affected significantly by the increase in the rate of inflation. In this income group, the price index increased at a rate of 8.6 percent in 2005 compared to 6.2 percent in 2004, mainly on account of increased price indices of goods and services that are highly consumed by this group such as electricity, kerosene and water; transport; and beverages and cigarettes. For the lower income group, the average price index increased by 8.3 percent in 2005 compared to 6.4 percent in 2004 as a result of increased price indices of goods and services that are regularly consumed by the group, which include electricity, kerosene and water; rent; and health services. The price index for middle income group decreased to a rate of 7.9 percent in 2005 compared to 8.2 percent in 2004 following a decrease in the price indices in this income group of goods and services of electricity, kerosene, water, clothing, footwear, services and other household utensils.
15. The overall average price indices for the residents of Dar es Salaam of low, middle and high income groups increased by 8.2; 7.9; and 8.5 percent in 2005, compared to 6.4; 8.2 and 6.2 percent in 2004 respectively. The price indices of transportation for the residents of Dar es Salaam of low, middle and high income groups increased by 8.8; 7.8; and 12.0 percent in 2005 compared to 0.5; 2.6; and 9.4 percent in 2004 respectively. The price index for electricity, kerosene and water for low income group increased by 21.8 percent in 2005 compared to 12.4 percent in 2004. For the middle and high income groups, the price indices for that group of goods and services increased at a lower rate of 17.0 and 18.0 percent in 2005 compared to 27.7 and 18.6 percent in 2004 respectively. In 2005, the price index of food for the low and high income groups increased by 7.3 and 7.4 percent compared to 6.8 and 6.2 percent in 2004 respectively. For the middle income group, the price index for food was 9.8 percent in 2005, the rate which was lower than 10.0 percent in 2004.
Capital Formation
16. Capital formation increased from shs. 624,371 million in 2004 to shs. 735,180 million in 2005, at constant 1992 prices, equivalent to an increase of 17.7 percent. Capital formation at current prices increased from 2,598,974 million in 2004 to 3, 149,402 million in 2005 equivalent to an increase of 21.2 percent. The increase in capital formation was attributed to an increase in buildings construction, importation of capital equipment; and other works. In 2005, the ratio of capital formation to GDP was 32.9 percent compared to 29.8 percent in 2004 at 1992 constant prices.
17. Capital formation in buildings construction activities increased to shs. 227,471 million in 2005 from shs. 201,671 million in 2004 at 1992 constant prices, equivalent to an increase of 12.8 percent. The growth rates of rural own account and non residential buildings construction increased by 10.1 and 12.2 percents in 2005 compared to 8.6 and 9.0 percents in 2004 respectively. Capital formation in residential buildings declined to 19.0 percent in 2005 from 21.1 percent in 2004.
18. Other capital formation works including land improvements; roads and bridges; and water supplies increased from shs. 111,876 million in 2004 to shs. 138,005 million in 2005, at 1992 constant prices, equivalent to an increase of 23.4 percent. The level of growth rate was due to an increase in land improvements by 6.0 percent. Other works in roads and bridges, and water supplies grew at 26.7 and 19.3 percents in 2005 compared to 7.3 and 12.0 percents in 2004 respectively.
19. Importation of capital equipment in the country increased to shs. 360,718 million in 2005 from shs. 303,966 million in 2004, equivalent to an increase of 18.7 percent, at 1992 constant prices. The value of transport equipment purchased increased to shs. 117,413 million in 2005 from shs. 98,940 million in 2004, equivalent to an increase of 18.7 percent. Likewise the purchase of machinery and other equipment increased from shs. 205,025 million in 2004 to shs. 243,305 million in 2005 at 1992 constant prices, equivalent to an increase of 18.7 percent.
20. Investment in fixed capital formation that includes buildings, other construction works and capital equipment increased from shs. 617,512 million in 2004 to shs. 726,194 million in 2005 at 1992 constant price, equivalent to an increase of 17.6 percent.
21. The value of change in stocks at 1992 constant prices was shs. 8,986 million in 2005 compared to shs. 6,860 million in 2004, equivalent to an increase of 31.0 percent. Accumulation in stocks at current prices increased to shs. 31,137 million in 2005 from shs. 28,270 million in 2004, equivalent to an increase of 10.1 percent.
22. Capital formation in the private sector at current prices increased from shs. 1,620,627 million in 2004 to shs. 2, 050,093 million in 2005, equivalent to an increase of 26.5 percent. The contribution of private sector to capital formation in 2005 was 65.1 percent compared to 62.4 percent in 2004. Capital formation in public sector increased from shs. 950,077 million in 2004 to shs. 1, 068,171 million in 2005, at current prices, equivalent to an increase of 12.4 percent. Contribution of public sector to capital formation was 33.9 percent in 2005 compared to 36.6 percent in 2004. An increase of capital formation in public sector was attributed to an increase in investment by public corporations and government agencies.
source: Governmentwebsite
