Tanzania's international trade dynamics experienced a shift in the last quarter of 2024, as export prices increased while import costs slightly decreased. Data from the National Bureau of Statistics (NBS) indicates that the Export Price Index (XPI) rose by 1.0 per cent to 116.8 by December 2024, up from 115.6 in the previous quarter.
This increase, along with a 0.4 per cent reduction in the Import Price Index (MPI) to 103.9, led to an improvement in the nation's Terms of Trade (ToT).
The export sector's performance was driven by rising global prices for key commodities, particularly gold and cashew nuts. The XPI for "Natural or cultured pearls, precious stones and metals, coin," which has a 59.0 per cent weight in the export basket, increased by 5.2 per cent. This rise is linked to increased global demand for gold, amid geopolitical uncertainties, enhancing its appeal as a safe-haven asset.
Additionally, the price index for "Edible fruits and nuts, peel of citrus fruit or melons," with a 6.6 per cent weight, rose by 5.7 per cent. This was due to higher global demand for cashew nuts. On the import side, the slight decrease in the MPI was mainly due to a 7.1 per cent drop in the price index for "Mineral fuels, oils and products of their distillation," which holds a 23.8 per cent import weight. This decline reflects increased supply from non-OPEC+ countries and reduced demand from major consumers like China.
The "Cereals" category also contributed to lower import prices, with a 3.6 per cent decrease due to increased wheat production in major exporters like China, the United States, and Russia, leading to lower global prices.
The interplay between rising export prices and slightly falling import prices resulted in a positive shift in Tanzania's Terms of Trade. The ToT index increased by 1.5 points to 112.4 in the fourth quarter of 2024, up from 110.9 in the previous quarter.
While the overall trade position strengthened, specific commodity categories showed nuanced movements. The export price index for "Fish and crustacean, molluscs and other aquatic invertebrates" decreased by 2.8 per cent due to increased production and reduced demand from major importers like the U.S.
The favorable Terms of Trade suggest enhanced purchasing power for Tanzania's exports. "However, continued monitoring of global commodity prices and demand dynamics will be crucial to understanding the sustainability of these trends in the coming quarters," says NBS.
Source: The Guardian