Poverty and Human Development Report 2009 - UNDP in Tanzania

Income Poverty and GDP Growth
the 2007 poverty estimates indicate that the economy’s significant growth since 2000/01 has
not translated into income poverty reduction. 4 one possible explanation is that rising inequality
has offset the gains from growth. however, this cannot be the case, since income inequality has
hardly changed. it is important therefore to reflect on factors other than income inequality that
can explain the apparent lack of impact of economic growth on income poverty.
analysis of changes in national expenditure between 2000 and 2007 shows that household
consumption grew less rapidly than other elements of gdP 5 , such that its share in gdP has
declined from 77% in 2000 to 73% in 2007 (at constant 2001 prices) (table 4). over the same
period, the share of government consumption increased rapidly from 12% to about 18% of total
gdP, investment expenditures rose from 16% to about 24%, and net exports from -5% to -15%.
Table 4: GDP and Expenditure (at constant 2001 prices) (TShs millions)
Economic Activity
Expenditure
2000 2007
GDP Share
(%)
Expenditure
GDP Share
household consumption 6,615,765 77 10,021,704 73
government consumption 1,014,494 12 2,495,962 18
investment 1,421,461 16 3,358,305 24
net exports -466,381 -5 -2,074,049 -15
GDP at market prices 8,585,339 100 13,801,921 100
source: economic survey 2007 (Mofea, 2008a) and economic survey 2008
Chapter I CLUSter 1
thus, trends in gdP growth and income poverty can be partly explained by investments in
capital intensive sectors and by increases in government spending. hence, while growth has not
resulted in immediate income poverty reduction, the increased capital investment for structural
change in the economy, improved productivity, and expansion in public spending in areas such
as roads, education and health services, may provide the foundation for future reduction in
poverty.
a further explanation may lie in the use of different data sources – the hbs and the national
accounts – which generate different estimates of household consumption and growth. it is not
uncommon for the level of private consumption expenditure derived from national accounts data
to vary from the mean household expenditures derived from household survey data. estimates
of growth rates derived from these two sources may also differ. Moreover, it is not uncommon in
4 it should be noted that the measure of income poverty does not reflect benefits accrued from the use of public
health, water and education services.
5 note that gdP is the sum of all spending on goods and services in the economy, and may be represented by the
formula: GDP = C + I + G + (Ex - Im), where “c” equals households’ consumption expenditure, “i” equals investment,
“g” equals government spending and “(ex - im)” equals net exports, (i.e. the value of exports minus imports). net
exports will be negative when the value of imports exceeds the value of exports, which has been the case in tanzania
during this period.
(%)
13