Impact of the world financial crisis to the economy of Tanzania: a reflection from macroeconomic indicators

Towards the end of the third quarter of the year 2007, several financial corporate in USA and UK collapsed as a result of excessive defaults in low quality mortgages named sub-prime mortgages. The collapse weakened major economies and eventually spread to other economies ending up in the world financial crisis. This research has attempted to evaluate quantitatively and qualitatively whether Tanzania’s macroeconomic indicators reflect any signs of our economy being impacted. Three phases were defined, Phase I (Jan. 2003-Dec. 2005 in HE. Mkapa’s era, and two other 21 months’ each, Phases II and III in President Kikwete’s era covering pre and during crisis periods. The study was secondary data based mostly obtained from BOT reports and other reliable sources including the government website. Data were cleaned and tested for significance of means’ differences between two Kikwete’s eras using ANOVA and Brown-Forsythe and Welch F tests. The tests were done on absolute values, month on month growth percentages and indexed percent growth, where the first month of the phase was fixed at 100% and the rest grown on it. Except for value of loans, exports and, government debt which did not indicate signs of being impacted, all other indicators tested (financial instruments, FDIs, Interest and exchange rates, employment levels and foreign reserves) indicated signs of being impacted. Although impacted, the monthly percentage growths did not indicate abrupt changes which is a sign of economic stability. These findings triggers the need for world governments entering global/regional unified and enforceable economic pacts, a push for enhanced IMF and world bank roles in managing world economy stability, need for strengthening financial sector regulations to manage negative side of highly increasing “financial engineering” and the need for governments to invest in in-depth study on financial crises to establish the best ways to build effective economic ‘shock absorbers’.