19th November 2009 National Policy Dialogue 1 Growth, Income Poverty, and Economic Wellbeing of Households Donald Mmari REPOA

19th November 2009 National Policy Dialogue 2 Outline Progress towards targets Progress towards targets Implications for Policy Implications for Policy Implications for monitoring Implications for monitoring

19th November 2009 National Policy Dialogue 3 Progress towards targets High Growth rate over the last decade High Growth rate over the last decade 7.4% (2008) compared to 4.1% (1998)7.4% (2008) compared to 4.1% (1998) Modest structural change (NA 2007)Slide 9 Modest structural change (NA 2007)Slide 9Slide 9Slide 9 Dynamism in service sector (48% of GDP)Dynamism in service sector (48% of GDP) Fastest growth in communication Fastest growth in communication Manufacturing growth of 8% since 2003 (9.4% of GDP 2008)Manufacturing growth of 8% since 2003 (9.4% of GDP 2008) Agricultural growth 4.4% since 2000, against MKUKUTA target of 10% by 2010 (24% of GDP)Agricultural growth 4.4% since 2000, against MKUKUTA target of 10% by 2010 (24% of GDP) Inflation rose sharply (10.3% in 2008) Inflation rose sharply (10.3% in 2008)

19th November 2009 National Policy Dialogue 4 Progress towards targets (ctd) Limited depth and diversification for domestic banks Limited depth and diversification for domestic banks Inadequate lending for local investmentsInadequate lending for local investments High interest rate spread (12.5% in 2008)High interest rate spread (12.5% in 2008) No significant declines in income poverty reduction over the decade No significant declines in income poverty reduction over the decade Despite impressive macro economic outlook between 2001 and 2007Despite impressive macro economic outlook between 2001 and 2007 Headcount dropped from 35.7% to 33.6%Headcount dropped from 35.7% to 33.6%

19th November 2009 National Policy Dialogue 5 Progress towards targets (ctd) Consumption per capita increased by only 5% (average annual increase of 0.8%)Consumption per capita increased by only 5% (average annual increase of 0.8%) Very low nominal hh consumption Slide 10Very low nominal hh consumption Slide 10Slide 10Slide 10 98% less than Shs 58,000 pm 98% less than Shs 58,000 pm 80% less than Shs 38,000 pm, or 1,380/day 80% less than Shs 38,000 pm, or 1,380/day Majority still smallholder farmersMajority still smallholder farmers Higher headcount -38% (24% other urban, 16% Dar) Higher headcount -38% (24% other urban, 16% Dar) Generally insignificant change in inequalityGenerally insignificant change in inequality Domestic absorption = C + G+ I Slide 11Domestic absorption = C + G+ I Slide 11Slide 11Slide 11 ΔC = -4%, ΔI = +8%, ΔG = 6%. Could these underpin long-term growth and large ΔC? ΔC = -4%, ΔI = +8%, ΔG = 6%. Could these underpin long-term growth and large ΔC?

19th November 2009 National Policy Dialogue 6 Implications for policy Income poverty targets for MKUKUTA and MDG out of reach (needs annual real consumption per capita growth of 3.2%) Slide 12 Income poverty targets for MKUKUTA and MDG out of reach (needs annual real consumption per capita growth of 3.2%) Slide 12 Slide 12 Slide 12 Redistribution of income may not be effective without high and sustained growth rateRedistribution of income may not be effective without high and sustained growth rate Exploit comparative advantages and raise domestic employment and productivityExploit comparative advantages and raise domestic employment and productivity Rural hhs diversifying, but difficult for poorest hhs Rural hhs diversifying, but difficult for poorest hhs Interventions to raise agricultural productivityInterventions to raise agricultural productivity Incentives for smallholders to innovateIncentives for smallholders to innovate Appropriate forms of organizational and institutional arrangementsAppropriate forms of organizational and institutional arrangements

19th November 2009 National Policy Dialogue 7 Implications for policy (ctd) Investment in human capabilities and physical capital for sustained growth Investment in human capabilities and physical capital for sustained growth Increased investment in roads, railways and port facilities to realize TZ comparative advantage as trade and transport hubs and unlock manufacturing potentials Increased investment in roads, railways and port facilities to realize TZ comparative advantage as trade and transport hubs and unlock manufacturing potentials Deepen the local financial sector- addressing institutional and legal deterrents for credit risks, esp. for agriculture and SMEs Deepen the local financial sector- addressing institutional and legal deterrents for credit risks, esp. for agriculture and SMEs

19th November 2009 National Policy Dialogue 8 Implications for Monitoring Monitoring system need to be kept manageable-practical but sufficient for strategic planning and national reporting Monitoring system need to be kept manageable-practical but sufficient for strategic planning and national reporting Revision of indicators for growth and income poverty for more reliable evidence Revision of indicators for growth and income poverty for more reliable evidence Other proposed indicators Other proposed indicators Imports and reservesImports and reserves Government expenditureGovernment expenditure Exchange rates, monetary & capital marketExchange rates, monetary & capital market

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19th November 2009 National Policy Dialogue 11 Economic Activity Expenditure GDP Share (%) Expenditure Household consumption 6,615, ,021, Government consumption 1,014, ,495, Investment 1,421, ,358, Net exports -466, ,074, GDP at market prices 8,585, ,801,

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