The Factors Affecting Gross Domestic Product (GDP) in Developing Countries: The Case of Tanzania

Abstract

Gross Domestic Product (GDP) is one of the determinants of country’s economic growth. This study intends to analyze the factors that affect the GDP of Developing Countries whereby Tanzania is selected as a representative. Keynes model was adopted to be tested in Tanzanian GDP from 1970 to 2009. The result shows the GDP being at the same level year after year with no significant changes subject to some dormant factors. The most common GDP trend is a continuous growth with periods of acceleration and deceleration. Some occurrences of unconditional decline are afterwards plagued by further growth. Developing county’s GDP is confused and unbalanced, with regular and deep unconditional GDP falls and booms.  Tanzanian GDP as a developing country is influenced by Consumption (Government Final Expenditure and Household Final Expenditure) and Exports. Investment sector have to be encouraged for its impact on GDP be realized including stimulation of industrialization at country level. Problems such as increase in oil prices, power shortages and political instabilities are a distinctive source of GDP sinking in developing countries which require abruptly solution.

Key words: Gross Domestic Product (GDP) GDP variables, developing countries, Tanzania