The United Republic of Tanzania's economy showcased a steady performance in the first quarter of 2025, with GDP growth rising to 5.4% from 5.2% in the same period of 2024, as detailed in the National Bureau of Statistics report. Key insights reveal the top contributors to this growth include Mining & Quarrying (15.4%), Agriculture (14.2%), Finance & Insurance (12.0%), Construction (11.3%), Manufacturing (10.4%), and Transport & Storage (9.3%). The strongest growth rates were observed in Electricity (19.0%), Mining (16.6%), Finance & Insurance (15.4%), and Education (8.6%), highlighting robust sectoral advancements. However, weaker performers such as Construction (slowed to 4.3%), Trade (fell to 3.5%), and Information & Communication (halved from 14.6% to 7.8%) indicate areas needing attention to sustain overall economic momentum.

1. Overall GDP

• Growth: Q1 2025 GDP grew by 5.4%, slightly higher than 5.2% in Q1 2024.
• Size: At constant 2015 prices, GDP rose to TZS 40.7 trillion from TZS 38.6 trillion in Q1 2024.

2. Primary Activities (40.7% of GDP)

• Agriculture, Forestry & Fishing:
  • Growth improved from 2.5% (2024) to 3.0% (2025).
  • Key drivers:
    • Paddy production rose by 9.6% (568.9k tons → 623.3k tons).
    • Wheat output jumped 29.4% (29.6k → 38.3k tons).
    • Oil seeds +5.5%, beans +0.9%.
  • Contribution: 14.2% of total GDP growth.
  • Share in GDP: 27.2%.
• Mining & Quarrying:
  • Explosive growth: 3.5% (2024) → 16.6% (2025).
  • Production surged in key minerals:
    • Gold +16.1% (13,610 kg → 15,797 kg).
    • Coal +19.1% (745k tons → 888k tons).
    • Mica +475.6%, Iron ore +256%, Phosphate +465%.
  • Contribution: largest, at 15.4% of total GDP growth.
  • Share in GDP: 11.0%.

3. Secondary Activities (21.4% of GDP)

• Manufacturing:
  • Growth: 5.8% → 7.2%.
  • Supported by increased production of consumer and industrial goods.
  • Contribution: 10.4% of growth.
  • Share in GDP: 6.8%.
• Electricity:
  • Massive jump: 7.6% → 19.0%.
  • Boosted by Julius Nyerere Hydropower Dam coming online.
  • Share in GDP: 0.2% (small, but impactful growth driver).
• Water Supply:
  • Growth: 3.1% → 4.2%, linked to production rising to 98.9m m³ (from 94.7m).
  • Share in GDP: 0.4%.
• Construction:
  • Slowed: 6.4% → 4.3%.
  • Still important with 11.3% contribution to GDP growth.
  • Supported by cement & iron-steel output.
  • Share in GDP: 12.7%.

4. Tertiary Activities (37.9% of GDP)

• Trade & Repair:
  • Decline in growth: 5.3% → 3.5%.
  • Impacted by moderate import and agriculture trade flows.
  • Share in GDP: 8.4%.
• Transport & Storage:
  • Growth: 5.7% → 6.5%, driven by cargo tonnage and SGR rail services.
  • Contribution: 9.3% of GDP growth.
  • Share in GDP: 7.2%.
• Financial & Insurance:
  • Growth: 14.9% → 15.4%.
  • Supported by:
    • Deposits up 18.5% (TZS 36.3T → 43.0T).
    • Loans up 14.7% (TZS 34.1T → 39.1T).
  • Contribution: 12.0%.
  • Share in GDP: 3.5%.
• Information & Communication:
  • Slowed sharply: 14.6% → 7.8%.
  • Still supported by mobile money, internet expansion & broadcasting.
  • Share in GDP: 1.6%.
• Education:
  • Growth: 5.5% → 8.6%, thanks to rising student enrollments.
  • Share in GDP: 2.2%.

Table 1: Sectoral Growth Performance and Contribution Analysis

The economic implications of Tanzania's sectoral growth and contributions in Q1 2025 are multifaceted, reflecting both strengths and challenges:

Tanzania's Q1 2025 GDP growth of 5.4% at constant 2015 prices, rising from TZS 38.6 trillion in Q1 2024 to TZS 40.7 trillion, signals a resilient and accelerating economy amid a global slowdown. This performance outpaces the revised global projection of 2.8% for 2025, influenced by U.S. tariff policies and trade tensions, as well as Sub-Saharan Africa's expected 3.8% growth. It also exceeds regional peers in the SADC (e.g., South Africa's 0.8%, Namibia's 2.7%) and aligns with strong EAC growth (Uganda at 8.6%, Rwanda at 7.8%). This implies sustained macroeconomic stability, potentially boosting investor confidence and supporting Tanzania's ambition to reach a USD 1 trillion economy by 2050 through structural reforms. However, reliance on public sector-driven growth could strain fiscal balances if external shocks like commodity price volatility or climate events intensify.

The growth trajectory suggests potential for full-year 2025 GDP expansion of 5.8-6.0%, driven by infrastructure and sectoral diversification, but it highlights vulnerabilities: inflation risks from rising energy and food costs, and the need for private sector-led reforms to enhance job creation, as agriculture employs 65% of the workforce yet grows modestly. Positive spillovers include improved foreign exchange reserves from mining exports and reduced energy imports due to hydropower advancements, potentially stabilizing the Tanzanian shilling.

Primary Sector Implications (40.7% of GDP)

Agriculture, Forestry & Fishing (27.2% share, 3.0% growth, 14.2% contribution): The sector's uptick from 2.5% in Q1 2024, fueled by paddy (+9.6% to 623.3k tons) and wheat (+29.4% to 38.3k tons), implies enhanced food security and rural income growth, supporting poverty reduction in a sector employing most Tanzanians. However, modest overall growth underscores challenges like weather dependency and low productivity, potentially exacerbating inequality if not addressed through investments in irrigation and value chains. Positive linkages to manufacturing (e.g., agro-processing) could amplify multiplier effects, but slower trade flows might limit export gains.

Mining & Quarrying (11.0% share, 16.6% growth, 15.4% contribution): Explosive growth from gold (+16.1% to 15,797 kg), coal (+19.1% to 888k tons), and surges in mica (+475.6%), iron ore (+256%), and phosphate (+465%) positions mining as the top growth driver, boosting export revenues (gold alone accounts for ~50% of non-traditional exports) and government royalties. Implications include stronger fiscal space for infrastructure, but risks of Dutch disease—where resource booms crowd out other sectors—and environmental concerns from expanded operations. This could attract FDI but heighten volatility tied to global commodity prices.

Secondary Sector Implications (21.4% of GDP)

Manufacturing (6.8% share, 7.2% growth, 10.4% contribution): Acceleration from 5.8% reflects increased production of consumer and industrial goods, signaling progress in industrialization under Tanzania's FYDP III. This implies job creation in urban areas and reduced import dependence, with linkages to agriculture (e.g., food processing) and mining (e.g., metal fabrication). However, energy-intensive industries benefit from electricity growth, potentially lowering costs and enhancing competitiveness.

Electricity (0.2% share, 19.0% growth): The massive jump, driven by the Julius Nyerere Hydropower Dam's commissioning, enhances energy security, reduces reliance on costly imports, and supports industrial expansion. Implications include lower electricity tariffs (potentially curbing inflation), improved manufacturing productivity, and export potential via regional grids, but risks from hydrological variability due to climate change.

Water Supply (0.4% share, 4.2% growth): Tied to production rising to 98.9 million m³, this suggests better urban access, aiding health and sanitation. Broader implications: Supports agriculture and manufacturing, but urban-rural disparities could persist without expanded infrastructure.

Construction (12.7% share, 4.3% growth, 11.3% contribution): Slowdown from 6.4% amid cement and iron-steel output growth indicates a maturing infrastructure cycle (e.g., SGR rail). This implies sustained employment in labor-intensive projects but potential fiscal pressure if public spending tapers. Positive: Multiplier effects on transport and real estate.

Tertiary Sector Implications (37.9% of GDP)

Trade & Repair (8.4% share, 3.5% growth): Decline from 5.3% due to moderate imports and agriculture flows suggests subdued consumer demand or supply chain issues, potentially signaling inflationary pressures or weaker external trade amid global tensions. Implications: Slower retail growth could limit informal sector jobs, but ties to agriculture imply recovery with better harvests.

Transport & Storage (7.2% share, 6.5% growth, 9.3% contribution): Driven by cargo and SGR services, this enhances logistics efficiency, reducing costs for exports and imports. Implications: Boosts trade competitiveness, tourism, and regional integration (EAC), with potential for more FDI in ports/rail.

Financial & Insurance (3.5% share, 15.4% growth, 12.0% contribution): Supported by deposits (+18.5% to TZS 43.0 trillion) and loans (+14.7% to TZS 39.1 trillion), this reflects deepening financial inclusion via mobile money and credit expansion. Implications: Stimulates investment across sectors, but rapid credit growth risks non-performing loans if economic shocks hit.

Information & Communication (1.6% share, 7.8% growth): Sharp slowdown from 14.6% despite mobile/internet expansion implies saturation or competition. Implications: Digital economy growth supports fintech and e-commerce, enhancing productivity, but slower pace could hinder tech-driven diversification.

Education (2.2% share, 8.6% growth): Rising enrollments signal human capital investment, implying long-term productivity gains and reduced inequality.

Key Insights and Broader Risks

Top contributors (mining 15.4%, agriculture 14.2%, finance 12.0%) highlight a balanced yet resource-heavy growth model, with strongest rates in electricity (19.0%) and mining (16.6%) pointing to infrastructure-led momentum. Weaker areas like construction (4.3%), trade (3.5%), and ICT (7.8%) suggest external vulnerabilities. Overall, this fosters employment (especially in services/mining), fiscal revenues, and poverty alleviation, but calls for diversification to mitigate climate risks, global trade disruptions, and debt sustainability. IMF recommendations emphasize reforms for private sector growth to sustain 6%+ annual expansion.

Strong Growth, Low Inflation, but Trade and Budget Deficits Persist

Zanzibar’s economy showed resilience in 2024, with real GDP growth rising to 6.8%, up from 5.1% in 2023, driven primarily by tourism and infrastructure investments like the SGR and port upgrades. Tourist arrivals surged to 2.2 million in 2025, supporting the services sector, while FDI jumped by 28.3% to USD 1.72 billion, fueling construction. Inflation remained stable at 3.4% in June 2025, down from 6.1% a year earlier, well within the BoT's 3–5% target. On the fiscal front, domestic revenue reached TZS 874.9 billion, covering 95.6% of public income, though a TZS 248.5 billion budget deficit persists. In trade, Zanzibar posted a goods trade deficit of USD 309.2 million, as exports fell 11.9% (led by a 27.2% decline in cloves) while imports rose 8.4%. Meanwhile, the financial sector expanded with credit to the private sector growing by 23.5% and bank deposits increasing by 12.1%, signaling deepening financial inclusion despite high lending rates (15.12%).

1. Real Sector Performance (GDP Growth)

The real sector encompasses economic activities producing goods and services, with GDP growth reflecting Zanzibar’s economic vitality.

• Real GDP Growth (2024):
  • Value: 6.8%, up from 5.1% in 2023.
  • Context: This aligns with earlier reports, such as a 7% growth in January–September 2024 and 7.2% in Q4 2024, driven by tourism and trade. The African Development Bank projects Zanzibar’s growth to exceed 6% in 2025, supported by tourism, construction, and real estate.
  • Drivers:
    • Industry Sector: Construction and manufacturing led growth, fueled by infrastructure projects like the Standard Gauge Railway (SGR) and port expansions. Construction benefits from public-private partnerships (PPPs) and foreign direct investment (FDI), with Tanzania’s FDI rising 28.3% to USD 1.72 billion in 2024.
    • Services Sector: Accommodation and food services, tied to tourism, were major contributors. Tourist arrivals reached 2,193,322 in 2025, up 10% from 1,994,242 in 2024, boosting hospitality. The Tanzania National Business Council projects tourism’s GDP contribution to reach 19.5% by 2025/26.
  • Implications: The 6.8% growth reflects Zanzibar’s economic resilience, driven by tourism and infrastructure. However, reliance on tourism (10% of GDP) and construction makes the economy vulnerable to external shocks, such as global tourism fluctuations or commodity price volatility. Diversification into manufacturing and agriculture, as outlined in Zanzibar’s USD 2 billion plan, is critical.
• Comparison with Mainland Tanzania:
  • Mainland Tanzania grew at 5.6% in 2024, projected at 6% in 2025, driven by agriculture, finance, and construction. Zanzibar’s higher growth (6.8%) reflects its tourism-led economy, but its smaller economic base (contributing ~3% to Tanzania’s GDP) limits its overall impact.

2. Inflation Trends

Inflation measures the rate of price increases, affecting purchasing power and economic stability.

• Headline Inflation:
  • 12-Month Average (June 2025): 3.5%.
  • June 2025 (Monthly): 3.4%, down from 6.1% in June 2024.
  • Context: Inflation eased from 5.1% in 2024 and 6.9% in 2023, with February 2025 at 4.8%. The National Bureau of Statistics reported 3.3% inflation in June 2025, driven by food price increases (e.g., finger millet at 7.0%). Zanzibar’s inflation remains below the 5% medium-term target set by the Bank of Tanzania (BoT) and aligns with East African Community (EAC) criteria.
  • Drivers:
    • Stabilized Food Prices: Declining food inflation (5.3% in April 2025) reflects improved agricultural output and stable global commodity prices.
    • Controlled Non-Food Prices: Transport costs moderated due to stable fuel prices, with energy inflation at 7.3% in April 2025, down from 9.3% in 2024.
  • Implications: Low inflation (3.4%) supports consumer purchasing power and aligns with the BoT’s 3%–5% target under its 2025–2030 Strategic Plan. However, food price volatility (e.g., finger millet) poses risks, particularly for low-income households, given Zanzibar’s 26.4% poverty rate. Continued monetary policy prudence (6% Central Bank Rate) is essential.
• Comparison with Mainland Tanzania:
  • Mainland Tanzania’s inflation was 3.2% in May 2025 and 3.1% in January 2025, slightly lower than Zanzibar’s 3.4%. Zanzibar’s higher inflation reflects its reliance on imported goods and tourism-driven demand.

3. Government Budgetary Operations (July 2024 – May 2025)

The government budget reflects fiscal policy, balancing revenues, grants, and expenditures to fund public services and development.

• Revenues and Grants:
  • Total: TZS 914.7 billion.
    • Domestic Revenue: TZS 874.9 billion (95.6% of total).
      • Tax Revenue: TZS 796.6 billion (86.9% of total).
      • Non-Tax Revenue: TZS 78.3 billion (8.6% of total).
    • Grants: TZS 39.8 billion (4.4% of total).
  • Context: Strong revenue performance aligns with Mainland Tanzania’s TZS 2,339.7 billion tax collection in May 2025, 4.1% above target. Zanzibar’s tax revenue reflects improved administration and compliance, supported by digital systems like the Tanzania Instant Payment System (TIPS). Grants, including TZS 185 billion from China for health and economic cooperation, bolster fiscal space.
  • Implications: High domestic revenue (95.6%) reduces grant dependency, but low grant inflows (4.4%) limit funding for development projects. Enhanced tax mobilization, as per MKUMBI II reforms, is critical.
• Expenditures:
  • Total: TZS 1,123.4 billion.
    • Recurrent Expenditure: TZS 744.7 billion (66.3% of total).
    • Development Expenditure: TZS 378.7 billion (33.7% of total).
  • Context: Expenditure aligns with revenue, reflecting fiscal prudence, as noted in the BoT’s mid-year review. Development spending supports tourism (TZS 359.9 billion budget for 2025/26) and infrastructure (e.g., Dodoma Transport Project). Recurrent spending covers wages and public services, critical for Zanzibar’s 9.3% unemployment rate.
  • Implications: The high recurrent share (66.3%) limits development funding, necessitating expenditure rationalization to meet Vision 2050 goals (e.g., 90% electricity access).
• Budget Deficit:
  • Deficit (Before Grants): TZS 248.5 billion.
  • Financing: Covered by domestic borrowing (e.g., TZS 625.5 billion mobilized in April 2025, including TZS 421.7 billion in Treasury bonds) and grants.
  • Context: Public debt remains sustainable with a moderate risk of distress, per the IMF’s 2024 Debt Sustainability Analysis. Zanzibar’s deficit aligns with Mainland Tanzania’s TZS 270.2 billion deficit in May 2025.
  • Implications: Domestic borrowing supports fiscal needs but increases debt servicing costs (TZS 640 billion in April 2025). Grants and FDI (USD 1.72 billion in 2024) are vital to reduce borrowing reliance.

4. Trade Performance (Goods Only)

Trade performance reflects Zanzibar’s external sector, focusing on goods exports and imports, with services (e.g., tourism) covered separately.

• Total Exports (Goods):
  • Value: USD 150.3 million, down from USD 170.6 million in 2024 (-11.9%).
  • Composition:
    • Cloves: USD 66.4 million (44.2% of exports), down from USD 91.2 million (-27.2%).
    • Seafood & Other Goods: USD 60.4 million (40.2% of exports).
    • Manufactured Goods: USD 23.5 million (15.6% of exports).
  • Context: The decline in clove exports reflects global market downturns, as noted in earlier reports. Seafood and manufactured goods growth aligns with diversification efforts under Zanzibar’s USD 2 billion plan. Total Tanzania exports (including Mainland) reached USD 16.1 billion in 2024, led by gold and tourism.
  • Implications: The 11.9% export drop, particularly in cloves, strains foreign exchange earnings, given cloves’ 90% production on Pemba. Diversification into seafood and manufacturing is promising but requires market expansion.
• Total Imports (Goods):
  • Value: USD 459.5 million, up from USD 423.7 million in 2024 (+8.4%).
  • Composition:
    • Capital Goods: USD 222.5 million (48.4% of imports).
    • Intermediate Goods: USD 141.4 million (30.8% of imports).
    • Consumer Goods: USD 95.6 million (20.8% of imports).
  • Context: Import growth reflects infrastructure projects (e.g., SGR, port expansions) and consumer demand, consistent with Mainland Tanzania’s capital goods imports. Zanzibar’s reliance on imported staples and petroleum products persists.
  • Implications: Rising imports, driven by capital goods, support industrialization but widen the trade deficit, straining reserves (USD 5,307.7 million, 4.3 months of import cover).
• Trade Deficit:
  • Value: USD 309.2 million, widened from USD 253.1 million in 2024 (imports USD 423.7 million – exports USD 170.6 million).
  • Context: The deficit reflects falling clove exports and rising capital goods imports, consistent with Tanzania’s overall current account deficit of USD 2,117.6 million.
  • Implications: The widened deficit pressures the Tanzanian Shilling (8% depreciation in 2023) and reserves. Export promotion (e.g., seafood, manufactured goods) and tourism (USD 3,934.5 million in receipts) are critical to offset deficits.

5. Financial Sector Performance

The financial sector supports economic activity through credit provision and deposit mobilization, critical for private sector growth.

• Credit to Private Sector (June 2025):
  • Value: TZS 747.7 billion, up 23.5% from June 2024.
  • Sectors:
    • Trade: 27.8% (TZS 207.9 billion).
    • Building & Construction: 20.2% (TZS 151.0 billion).
    • Personal Loans: 13.8% (TZS 103.2 billion).
    • Transport & Communication: 10.7% (TZS 80.0 billion).
  • Context: The 23.5% growth exceeds Mainland Tanzania’s 12.8% private sector credit growth in January 2025, driven by agriculture and SMEs. Zanzibar’s credit growth reflects tourism and construction demand, supported by the BoT’s 6% Central Bank Rate and TIPS (453.7 million transactions in 2024).
  • Implications: Robust credit growth (23.5%) supports SMEs and infrastructure, aligning with financial inclusion goals (87% adult target by 2030). However, the high trade and construction share risks overexposure if tourism slows.
• Deposit Mobilization:
  • Value: TZS 1,185.4 billion, up 12.1% from TZS 1,057.6 billion in June 2024.
  • Context: Growth aligns with Tanzania’s banking sector stability, with a 3.6% non-performing loan ratio in Q1 2025, below the 5% threshold. Mobile money transactions (TZS 198,859 billion in 2024) boost deposits.
  • Implications: Strong deposit growth (12.1%) reflects financial deepening, but high lending rates (15.12% in January 2025) may constrain borrowing. Digital platforms like TIPS enhance inclusion, supporting Vision 2050.

Summary Table: Key Economic Indicators for Zanzibar (Year Ending June 2025)

Key Takeaways and Policy Implications

1. Robust GDP Growth:
   • Zanzibar’s 6.8% growth in 2024, driven by tourism and construction, outpaces Mainland Tanzania (5.6%). Tourism (2.2 million arrivals) and infrastructure (e.g., SGR) are key drivers, but diversification into manufacturing and agriculture is needed to reduce tourism dependency (10% of GDP).
   • Policy: Implement Zanzibar’s USD 2 billion diversification plan to boost seafood and manufactured exports, aligning with Vision 2050.
2. Stable Inflation:
   • Inflation at 3.4% (June 2025) supports purchasing power, driven by stable food and fuel prices. However, food price volatility (e.g., 7.0% for finger millet) risks impacting the 26.4% poverty rate.
   • Policy: Enhance agricultural productivity and supply chain resilience to mitigate food price shocks, as per the Second Agriculture Sector Development Program.
3. Fiscal Prudence:
   • Strong domestic revenue (TZS 874.9 billion) reduces grant reliance, but the TZS 248.5 billion deficit requires sustained borrowing and grants. Development spending (33.7%) supports growth but is constrained by recurrent costs (66.3%).
   • Policy: Rationalize recurrent expenditure and leverage FDI (USD 1.72 billion in 2024) to fund infrastructure and tourism.
4. Trade Challenges:
   • The USD 309.2 million trade deficit, driven by a 27.2% drop in clove exports and 8.4% import rise, pressures reserves. Tourism receipts (USD 3,934.5 million) offset some losses, but goods exports need boosting.
   • Policy: Promote clove market recovery and expand seafood and manufacturing exports through trade agreements (e.g., AfCFTA).
5. Financial Sector Strength:
   • Credit growth (23.5%) and deposit mobilization (12.1%) reflect financial deepening, supported by digital payments (TIPS) and a stable banking sector (3.6% NPL ratio). High lending rates (15.12%) and trade/construction exposure pose risks.
   • Policy: Reduce lending rates and enhance SME financing, as per the BoT’s 2025–2030 plan, to sustain inclusion and growth.
6. Economic Context:
   • Regional Role: Zanzibar’s tourism and trade hub status supports growth, but its small GDP share (~3% of Tanzania’s USD 105.1 billion in 2022) limits impact.
   • Risks: Global commodity price volatility, tourism seasonality, and shilling depreciation (8% in 2023) pose challenges.
   • Opportunities: Vision 2050, MKUMBI II reforms, and digital financial inclusion (87% target) offer pathways to a USD 1 trillion economy.

Sub-Saharan Africa's economic outlook for 2024 presents a picture of gradual recovery, with growth projected to rise from 2.4% in 2023 to 3% in 2024, and reaching 4% by 2025-2026. This recovery is driven by improving private consumption and investment, fueled by easing inflation, which is expected to decline from 7.1% in 2023 to 4.8% in 2024, allowing for potential monetary policy rate cuts. However, the region’s macroeconomic performance remains challenged by high public debt, estimated at 58% of GDP in 2024, and a fiscal deficit projected to improve to 3.3% of GDP. Risks to the outlook include conflict (e.g., in Sudan), climate-related disasters, and the region's vulnerability to external shocks, with 53% of low-income countries facing high risk of debt distress. Addressing these challenges requires fiscal reforms and targeted investments to ensure sustained growth and stability.

1. Growth Outlook in Sub-Saharan Africa:

• Growth Recovery: Economic activity in Sub-Saharan Africa is expected to grow by 3% in 2024, up from 2.4% in 2023, and further accelerate to 4% by 2025-2026​.
• Per Capita Growth: Real income per capita is forecasted to grow by 0.5% in 2024 and 1.4% in 2025​.
• Strong Performers: Countries like Côte d’Ivoire (6.5%), Uganda (6%), and Tanzania (5.4%) are among the top performers expected to post over 5% growth in 2024​.

2. Growth Environment:

• Private Consumption and Investment: These are the main drivers of growth recovery, boosted by easing inflation which is expected to decline from 7.1% in 2023 to 4.8% in 2024​.
• Inflation Decline: Inflation is declining across the region, with around 70% of countries expected to register lower inflation rates in 2024​.
• Monetary Policy: As inflation cools, countries may pursue monetary policy rate cuts, fostering greater investment​.

3. Sub-Saharan Africa's Macroeconomic Performance:

• Public Debt: Government debt remains high at around 58% of GDP in 2024. Sub-Saharan African countries are expected to pay US$19 billion in public external debt service, mostly to private creditors​.
• Fiscal Balance: The median fiscal deficit is projected to decrease from 3.9% of GDP in 2023 to 3.3% of GDP in 2024, with efforts to raise revenue and reduce expenditure​.

4. Risks to the Outlook:

• High Debt: An elevated debt burden reduces the fiscal space for governments to invest in critical infrastructure and human capital​.
• Conflict and Climate Change: Ongoing conflict, such as in Sudan, and climate-related disasters, including floods and droughts, are key risks affecting growth and food security in the region​.

The Africa's Pulse October 2024 report key points about Sub-Saharan Africa's economic outlook

Sub-Saharan Africa is experiencing a gradual recovery in economic growth, but significant challenges like high debt, conflict, climate change, and limited fiscal space present risks to sustained progress. The region needs to address these challenges through fiscal reforms, targeted investments, and efforts to enhance macroeconomic stability.

1. Economic Growth Recovery: The region's economy is projected to grow by 3% in 2024, up from 2.4% in 2023, with further acceleration to 4% by 2025-2026. This is driven mainly by private consumption and investment, supported by easing inflation and anticipated interest rate cuts. However, the growth recovery remains modest compared to other global regions.
2. Inflation and Consumption: Inflation is expected to decline from 7.1% in 2023 to 4.8% in 2024, improving the purchasing power of households, which in turn supports private consumption. This cooling of inflation allows for potential monetary policy easing, encouraging investment and economic activity.
3. Macroeconomic Performance: Despite growth prospects, the region faces significant challenges:
   • High Debt Levels: Public debt remains at 58% of GDP, with US$19 billion in debt service payments, mostly owed to private creditors. This reduces the fiscal space for essential investments in infrastructure and social services.
   • Fiscal Balance: Fiscal deficits are improving slightly, from 3.9% of GDP in 2023 to 3.3% in 2024, thanks to revenue collection efforts and spending cuts. However, the region's debt burden continues to limit overall progress.
4. Risks to the Outlook:
   • Conflict and Climate Change: Ongoing conflicts, such as the war in Sudan, and extreme weather events (floods, droughts) are major risks to economic stability. These challenges undermine growth, disrupt food security, and exacerbate poverty in affected countries.
   • Vulnerability: Over 53% of low-income countries in Sub-Saharan Africa are at high risk of debt distress, and many countries are vulnerable to external shocks due to their high reliance on global financing and commodity exports.

Source: Africa’s Pulse October 2024 report

Tanzania's economic outlook for 2024 shows strong growth potential, with a projected GDP increase of 5.4%, significantly higher than the 3% average for Sub-Saharan Africa (SSA). As part of the East African Community (EAC), which is forecasted to grow by 4.7% in 2024, Tanzania benefits from macroeconomic stability and strategic investments in infrastructure, particularly in energy, telecommunications, and transport. These investments, combined with stable inflation, are expected to boost private consumption and investment. However, Tanzania's public debt is projected to rise from 42.5% to 48.4% of GDP, reflecting infrastructure spending, while the fiscal deficit is expected to stabilize at 3.3% of GDP. Risks remain, especially around rising debt and climate-related challenges like droughts and floods, which could impact agriculture and economic stability. Despite these risks, Tanzania's growth prospects remain robust in comparison to other SSA countries.

1. Growth Outlook

• Tanzania is expected to experience GDP growth of 5.4% in 2024, outperforming the regional average growth of 3% for SSA​.
• The East African Community (EAC), which includes Tanzania, is one of the strongest economic performers in SSA, with expected growth of 4.7% in 2024 and 5.7% by 2025–26​.

2. Growth Environment

• Tanzania benefits from macroeconomic stability and rising investments in sectors like energy, telecommunications, and transport, which help enhance productivity. The country’s inflation rate is expected to stabilize, supporting private consumption and investment​.
• Private consumption is expected to increase as inflation eases across SSA, with countries like Tanzania reaping benefits from stable inflation and favorable monetary policies, further bolstering growth​.

3. Macroeconomic Performance

• Government debt in Tanzania is estimated to rise slightly from 42.5% of GDP in 2023 to 48.4% of GDP in 2024, reflecting investments in key infrastructure projects​.
• In terms of sectoral performance, Tanzania’s growth is bolstered by services and infrastructure projects in energy and transport. Investment in these areas is critical for sustaining long-term growth​.
• Fiscal Balance: Tanzania's fiscal deficit is expected to improve slightly, with a fiscal deficit of around 3.3% of GDP in 2024​.

4. Risk Outlook

• High Debt: Public debt remains a key risk in Tanzania, as in many other SSA countries. The rising debt levels could strain fiscal resources, especially in a region where debt service obligations are already significant​.
• Climate Change and Conflict: Tanzania is exposed to climate risks and ongoing economic volatility in the region, which could affect agriculture and food security. Extreme weather events such as droughts or floods are persistent risks across the region​.

Tanzania's economic position relative to other Sub-Saharan African (SSA) countries

Tanzania's economy is performing well relative to other Sub-Saharan African countries, with solid growth prospects and important investments. However, the country must address challenges related to debt and climate change to ensure that growth is sustainable.

1. Tanzania’s Strong Growth Outlook: With a projected GDP growth of 5.4% in 2024, Tanzania is set to grow much faster than the Sub-Saharan African average of 3%. This positions Tanzania as one of the leading economies in the region, especially within the East African Community (EAC) where growth is also expected to be robust.
2. Growth Environment: Tanzania benefits from macroeconomic stability and is making significant investments in energy, transport, and telecommunications. These investments are crucial for reducing productivity bottlenecks and fostering economic expansion. Stable inflation will also boost private consumption and investment, further enhancing growth.
3. Macroeconomic Performance: Tanzania's debt level is rising but remains relatively manageable. The government is using this debt to finance critical infrastructure, which is essential for long-term economic development. The country’s fiscal deficit is also improving, suggesting prudent fiscal management.
4. Risk Outlook: Despite its positive growth outlook, Tanzania faces risks related to its rising debt levels, which could become a burden if not managed properly. Additionally, climate-related risks such as droughts and floods, which are common in SSA, pose threats to Tanzania’s agricultural sector and overall economic stability.

Source: Africa’s Pulse October 2024 report