Zanzibar’s economy grew by 6.2% in 2024, up from 5.8% in 2023, driven by tourism (12.7% growth), trade (7.1% growth), and infrastructure investments. The inflation rate dropped to 3.9%, improving purchasing power, while government revenue reached TZS 1.43 trillion (+5.6%), exceeding targets. However, a budget deficit of TZS 190 billion remains, requiring better expenditure management. Exports grew by 9.8% (TZS 596.2 billion), but import dependence remained high at TZS 2.01 trillion. To sustain growth, Zanzibar must diversify its economy beyond tourism and enhance domestic production to reduce trade imbalances​.

Zanzibar’s economy showed steady growth in 2024, supported by strong tourism recovery, increased trade activities, and improved infrastructure investments. The real GDP growth rate was estimated at 6.2%, up from 5.8% in 2023, driven by expansions in tourism, construction, and agriculture​.

1. GDP Growth and Sectoral Performance

• Real GDP growth: 6.2% in 2024, up from 5.8% in 2023.
• Nominal GDP: Estimated at TZS 5.2 trillion, reflecting expansion in key sectors.

Sectoral Contributions to GDP

Key Observations:

✅ Tourism (29.5% of GDP) remained the backbone of Zanzibar’s economy, recording a 12.7% growth, supported by 1.02 million tourist arrivals (+14.2%).
✅ Trade & transport (18.3% of GDP) benefited from increased imports and port activities.
⚠️ Agriculture (16.8% of GDP) recorded slow growth (+4.9%), affected by unpredictable weather and limited value addition.

2. Inflation and Cost of Living

• Average inflation in Zanzibar stood at 3.9% in December 2024, lower than 4.5% in 2023, supported by stable food prices and energy costs.
• Food inflation declined to 4.1%, down from 5.3% in 2023, due to improved local food production and steady imports.
• Non-food inflation remained stable at 3.7%, driven by controlled fuel prices and lower transport costs.

Implication:
✅ Lower inflation improved purchasing power, benefiting households and businesses.
⚠️ Food price volatility remains a risk, requiring further investment in food security and agro-processing.

3. Government Revenue and Expenditure

• Total government revenue: TZS 1.43 trillion, exceeding the target by 5.6%, due to improved tax collection and tourism levies.
• Tax revenue: TZS 1.22 trillion, up 8.4% from 2023, with strong contributions from VAT (TZS 368.9 billion, +10.2%) and import duties (TZS 292.5 billion, +7.8%).
• Total government expenditure: TZS 1.62 trillion, with 62% allocated to development projects such as roads, water, and education infrastructure.

Implication:
✅ Higher revenue collection reduces reliance on central government transfers.
⚠️ A budget deficit of TZS 190 billion remains, requiring better expenditure management.

4. Trade and Investment in Zanzibar

• Total exports: TZS 596.2 billion, up 9.8% from 2023, driven by seafood (TZS 212.4 billion, +12.3%) and spices (TZS 159.7 billion, +11.8%).
• Total imports: TZS 2.01 trillion, up 6.7%, mainly in machinery (TZS 521.3 billion, +9.2%) and petroleum (TZS 642.8 billion, +10.1%).
• Foreign Direct Investment (FDI): TZS 324.7 billion, up 15.6%, led by tourism, construction, and port expansion projects.

Implication:
✅ Higher exports and FDI indicate increased investor confidence.
⚠️ Import dependence remains high, especially in energy and industrial goods.

5. Banking and Financial Services

• Total banking sector assets: TZS 3.42 trillion, up 7.9%, indicating a growing financial sector.
• Private sector credit growth: +10.8%, mainly in real estate (TZS 312.5 billion, +11.2%) and trade (TZS 254.3 billion, +9.6%).
• Interest rates on loans: Average lending rate at 12.8%, slightly lower than 13.2% in 2023, making credit more accessible.

Implication:
✅ Lower interest rates encourage borrowing and investment.
⚠️ Credit concentration in a few sectors (real estate and trade) increases risks if economic shocks occur.

Key Takeaways

📌 Zanzibar’s economy grew by 6.2%, with tourism (12.7% growth) and trade (7.1% growth) as key drivers.
📌 Inflation remained stable at 3.9%, while government revenue (TZS 1.43 trillion) exceeded targets.
📌 Exports increased by 9.8% (TZS 596.2 billion), but import dependence remains high (TZS 2.01 trillion).
📌 The financial sector is expanding, with private sector credit growing by 10.8%.

To sustain growth, Zanzibar must diversify exports, improve agricultural productivity, attract more investment in manufacturing, and manage public spending efficiently

The economic performance of Zanzibar in December 2024 provides key insights into growth trends, sectoral contributions, fiscal management, and financial stability

1. Zanzibar’s Economy is Expanding, Led by Tourism and Trade

• Real GDP growth reached 6.2% in 2024, up from 5.8% in 2023, showing strong economic momentum.
• Tourism contributed 29.5% of GDP and grew by 12.7%, with tourist arrivals reaching 1.02 million (+14.2%), confirming a full post-pandemic recovery.
• Trade & transport (18.3% of GDP) grew by 7.1%, benefiting from increased port activities and import demand.

Implication:
✅ Zanzibar’s economy is growing steadily, driven by services and trade.
⚠️ Overreliance on tourism makes the economy vulnerable to external shocks (e.g., global crises, pandemics).

2. Inflation is Under Control, Improving Household Purchasing Power

• Inflation averaged 3.9% in 2024, lower than 4.5% in 2023, due to stable food and energy prices.
• Food inflation dropped to 4.1% from 5.3%, reflecting better domestic production and imports stability.

Implication:
✅ Lower inflation supports economic stability and consumer spending.
⚠️ Food price volatility remains a risk, requiring further investment in local food production.

3. Government Revenue is Improving, but a Fiscal Deficit Remains

• Revenue collection exceeded targets, reaching TZS 1.43 trillion (+5.6%), with strong tax contributions.
• Total expenditure was TZS 1.62 trillion, with 62% allocated to development projects.
• The budget deficit stood at TZS 190 billion, showing Zanzibar still relies on financing to meet expenditure needs.

Implication:
✅ Improved tax collection reduces dependency on mainland Tanzania.
⚠️ The budget deficit indicates a need for better public spending control and domestic revenue mobilization.

4. Trade and FDI Are Growing, but Import Dependence is High

• Exports increased by 9.8% (TZS 596.2 billion), mainly from seafood (+12.3%) and spices (+11.8%).
• Imports rose by 6.7% (TZS 2.01 trillion), with petroleum and machinery as the largest contributors.
• FDI inflows reached TZS 324.7 billion (+15.6%), driven by tourism, construction, and port expansion.

Implication:
✅ Rising exports and FDI show increasing investor confidence in Zanzibar.
⚠️ High import dependency, especially on petroleum and industrial goods, increases trade vulnerabilities.

5. Banking Sector is Expanding, Encouraging Private Sector Growth

• Total banking assets grew by 7.9% (TZS 3.42 trillion), showing financial sector strength.
• Private sector credit expanded by 10.8%, mainly in real estate (+11.2%) and trade (+9.6%).
• Lending rates dropped slightly to 12.8% (from 13.2% in 2023), making credit more affordable.

Implication:
✅ More credit availability supports business growth and investments.
⚠️ High credit concentration in real estate and trade may pose risks if the market slows.

Key Takeaways and What Needs to Be Done

📌 Zanzibar’s economy is growing steadily (+6.2%), with tourism (+12.7%) and trade (+7.1%) as key drivers.
📌 Inflation is low (3.9%), supporting household purchasing power and business growth.
📌 Government revenue (TZS 1.43 trillion) is improving, but a budget deficit (TZS 190 billion) remains a challenge.
📌 Trade and FDI are increasing, but import dependence on petroleum and industrial goods is high.
📌 The financial sector is expanding, with private sector credit growing by 10.8%.

Policy Recommendations:

🔹 Diversify the economy beyond tourism by promoting manufacturing, agriculture, and ICT.
🔹 Strengthen food security to reduce reliance on imported food items.
🔹 Enhance fiscal discipline to control the budget deficit and ensure sustainable spending.
🔹 Invest in renewable energy to reduce reliance on imported petroleum.
🔹 Support financial inclusion to expand credit access beyond real estate and trade.

Zanzibar’s economic outlook remains positive, but diversification and fiscal discipline will be key to sustaining long-term growth​