A Research Report Submitted in Partial/ Fulfillment of the Requirements for
Award of Master of Business Administration Corporate Management (MBA- CM)
of Mzumbe University
Foreign Direct Investment (FDI) is one of the most striking features of the global
economy today. This study aimed at assessing the impact of Foreign Direct Investment
and inflation to the economic growth of Tanzania. The data for this research was
collected from World Investment Reports; the analysis was just based time series data
for the year 1980-2012. The data was transformed into logarithmic form and Unit root
test was performed to ensure stationarity of the data before further analysis.
From the analysis the study found out that FDI has a significant contribution to the
economic growth in Tanzania the results found out that the more FDI the more the
economic growth. When FDI increases by 1 million USD, the GDP will increase by
0.396519 million USD other factors remaining constant. This could imply that an
increase in FDI inflows is good to economic growth.
This study also found out that an increase in the general price level (inflation) is not a
good factor for sustainable economic growth in Tanzania. From the results an increase in
the general price level (inflation rate) by 1% results in a decrease of GDP 0.0351896
million USD other factors remaining constant. This implies that an increase in the
general price level is harmful to economic growth.
The Study recommended that it is important for the government to of Tanzania to review
investment policies that will enable FDI inflows to continue having positive impact to
the local economy in Tanzania. It is also important for the government to focus on
maintaining inflation at a low rate (single digit). Stability in inflation rate is an important
factor to the economy, it is important for Tanzania to take into account of all factors
which cause an increase in the general price levels and address them with the
appropriate policies.