Tourism-Led Expansion Drives 7.1% GDP Growth and Regional Leadership
Zanzibar's economy demonstrated exceptional resilience and growth throughout 2025, significantly outperforming the national average and establishing itself as a crucial growth engine within the Tanzanian Union. The archipelago achieved a remarkable 7.1% real GDP growth in 2024, with projections indicating continued robust expansion into 2025.
The economic success story is anchored by a thriving tourism sector that generated 736,755 visitor arrivals in the twelve months ending November 2025, representing a substantial 16.2% year-on-year increase. This tourism boom created powerful multiplier effects across hospitality, transport, trade, and construction sectors, while generating critical foreign exchange earnings that strengthened Zanzibar's external position.
Macroeconomic stability improved alongside growth, with headline inflation moderating to 4.6% in November 2025 from 4.8% in October. Enhanced fiscal revenue collection, primarily from tourism-related levies and taxes on goods and services, provided the fiscal space for increased infrastructure and social service investments while maintaining a manageable deficit position.
| Indicator | Performance |
|---|---|
| Real GDP Growth (2024) | 7.1% |
| Growth Outlook (2025) | Strong, tourism-led expansion |
| Main Growth Drivers | Tourism, trade, construction, transport |
| Comparative Performance | Above national average (6.0-6.5%) |
Zanzibar's 7.1% growth significantly exceeded mainland Tanzania's performance, demonstrating the archipelago's unique competitive advantages in high-value tourism and services. The economic expansion translated into tangible improvements in employment opportunities and gradual poverty reduction, particularly in tourism-dependent regions.
| Inflation Measure | October 2025 | November 2025 | Change |
|---|---|---|---|
| Headline Inflation | 4.8% | 4.6% | ▼ -0.2pp |
| Food Inflation | 7.2% | 6.8% | ▼ -0.4pp |
| Non-Food Inflation | 3.3% | 3.1% | ▼ -0.2pp |
Inflation trends showed encouraging moderation in November 2025, with headline inflation declining to 4.6%. The improvement reflects relatively stable non-food inflation at 3.1%, benefiting from global commodity price stability and Tanzanian shilling strength. However, food inflation remained elevated at 6.8%, driven by supply constraints, seasonal factors, and Zanzibar's significant import dependence for food staples.
The persistence of food price pressures represents the primary inflation challenge, particularly given food's substantial weight in household consumption baskets. Addressing this requires continued focus on enhancing agricultural productivity, improving supply chain efficiency, and managing import costs.
| Tourism Indicator | Performance |
|---|---|
| Tourist Arrivals (12 months to Nov 2025) | 736,755 |
| Year-on-Year Growth | +16.2% |
| Average Hotel Occupancy | Above 65% |
| Main Source Markets | Europe, Asia, Africa |
| Economic Impact | Employment, FX earnings, multiplier effects |
Tourism solidified its position as Zanzibar's dominant economic driver, with 736,755 arrivals representing robust 16.2% year-on-year growth. The sustained hotel occupancy above 65% demonstrates strong and consistent demand across accommodation categories, from luxury resorts to boutique properties.
The tourism sector's impact extends far beyond direct visitor spending. It generates substantial employment across hospitality, transport, retail, and cultural services; produces critical foreign exchange earnings that strengthen external balances; and creates powerful linkages with agriculture, handicrafts, and construction sectors. European markets remained the primary source of arrivals, complemented by growing Asian and African visitor segments.
| External Indicator | Status |
|---|---|
| Export Performance | Improved (cloves, tourism services) |
| Import Demand | Rising (food, fuel, construction materials) |
| Trade Balance | Deficit, but narrowing |
| Foreign Exchange Inflows | Strong from tourism |
| Overall External Position | Strengthening |
Zanzibar's external sector showed resilience despite persistent merchandise trade deficits. Rising import demand for food, fuel, and construction materials reflected both economic growth and supply constraints, but robust tourism receipts effectively offset these pressures.
Foreign exchange earnings from tourism proved crucial in narrowing the trade deficit and strengthening overall external balances. This performance directly contributed to Tanzania's improved national current account position and services surplus, demonstrating Zanzibar's strategic importance to the Union's external stability.
| Fiscal Indicator | Performance |
|---|---|
| Revenue Collection | Improved |
| Main Revenue Sources | Taxes on goods & services, tourism-related levies |
| Expenditure Focus | Social services & infrastructure |
| Fiscal Balance | Manageable deficit |
| Debt Sustainability | Within prudent limits |
Fiscal performance strengthened considerably, with improved domestic revenue mobilization providing essential fiscal space for development priorities. The Revolutionary Government of Zanzibar successfully enhanced tax collection efficiency, particularly on goods and services and tourism-related activities, without creating excessive economic burdens.
The additional revenues financed higher public spending on critical infrastructure projects and social services, including education, health, and public facilities. The fiscal deficit remained manageable and sustainable, indicating responsible fiscal management that balances development needs with macroeconomic stability.
| Social Indicator | Trend |
|---|---|
| Overall Employment | Improving |
| Main Job-Creating Sectors | Tourism, trade, construction |
| Youth Employment | Gradual improvement |
| Poverty Pressure | Moderating |
| Skills Development | Enhanced focus on hospitality training |
Employment trends showed positive momentum, particularly in tourism, trade, and construction sectors. The tourism boom created diverse employment opportunities ranging from hospitality services to transport, retail, and cultural activities, with significant benefits for youth employment.
The combination of economic growth and improved employment outcomes contributed to moderating poverty pressures. However, ensuring inclusive growth that reaches all segments of society and geographic areas remains an ongoing priority for policymakers.
While Zanzibar's economic performance was strong, several challenges require strategic attention. Food inflation and import dependence highlight the need for enhanced agricultural productivity and food security initiatives. The heavy concentration in tourism, while currently beneficial, creates vulnerability to global economic downturns, health crises, or geopolitical disruptions.
Zanzibar's economic trajectory for 2025 and beyond appears highly positive, supported by sustained tourism demand, improving infrastructure, and macroeconomic stability. The archipelago's positioning as a premium tourism destination, combined with its strategic location in the Indian Ocean, provides substantial growth opportunities.
Success in capitalizing on these opportunities will require sustained policy focus on infrastructure development, human capital enhancement, economic diversification, and environmental sustainability. Maintaining macroeconomic stability while pursuing ambitious development goals remains essential.
Zanzibar's economic performance in 2025 demonstrates the archipelago's emergence as a vital growth pole within the Tanzanian Union and broader East African region. The 7.1% GDP growth, driven by exceptional tourism performance, positions Zanzibar significantly ahead of regional peers and validates the strategic focus on high-value services sectors.
The combination of robust growth, moderating inflation, improving fiscal and external positions, and expanding employment creates a strong foundation for sustainable development. Tourism's role as the economic backbone, generating foreign exchange equivalent to more than half of Tanzania's services receipts, underscores Zanzibar's strategic economic importance.
Looking forward, maintaining this positive trajectory requires balancing tourism expansion with economic diversification, addressing food security challenges, investing in infrastructure and human capital, and ensuring growth benefits reach all segments of society. With continued sound policy management and strategic investment, Zanzibar is well-positioned to sustain its role as an economic leader and model for tourism-led development in East Africa.
National Consumer Price Index (NCPI) - Food & Non-Alcoholic Beverages
Report Period: 2021-2025 (Historical) | 2026 (Forecast)
Base Year: 2020 = 100
Weight in Consumer Basket: 28.2%
Date Prepared: December 2025
Lead Analyst: Amran Bhuzohera
Tanzania’s food inflation landscape has undergone significant fluctuations over the past five years, shaped by global shocks, domestic supply constraints, and structural market inefficiencies. Between 2021 and 2025, food inflation averaged 5.2%, but the trend reveals pronounced volatility—rising from 3.7% in 2021 to a crisis peak of 7.3% in 2022, driven largely by fuel cost surges (energy inflation averaged 9.1% in 2022) and supply chain disruptions. Although 2024 marked a period of exceptional stability with food inflation dropping to 2.1%, households have since faced renewed pressure in 2025 as inflation accelerated sharply to an average of 6.0%. This rise reflects persistent cost-push factors, including elevated transport index levels that climbed from 103.34 (2021) to 121.50 (2025)—a cumulative increase of 17.6%, directly increasing food distribution expenses.
By November 2025, food inflation reached 6.6%, nearly double the national headline inflation of 3.4%, underscoring the disproportionate burden food prices impose on household purchasing power. Food prices have risen cumulatively by 31.5% since the 2020 base year, intensifying affordability challenges, particularly for low-income urban households and regions dependent on purchased food. Unprocessed and food crop categories—which are highly weather-sensitive—remain the most volatile, with swings as wide as 10.2 percentage points between June 2024 (-1.3%) and July 2025 (8.9%). This volatility reflects structural weaknesses such as low agricultural mechanization, post-harvest losses, long supply chains, and limited storage facilities.
Looking ahead, the 2026 forecast indicates continued upward pressure, with food inflation expected to average 7.1%, peaking at 8.5% in July, driven by seasonal supply shortages, lean-season stress, and higher input costs. Critical food categories such as food crops and unprocessed food are projected to hit peaks of 11.0% and 11.5%, respectively. With Tanzania’s population and urbanization steadily growing, combined with elevated energy and transport costs projected to rise to 6.5–8.0% in 2026, food price stability remains a central macroeconomic concern. Close monitoring and policy interventions—particularly in agricultural productivity, logistics, and market efficiency—will be essential to mitigate risks and sustain household welfare. Read More: Tanzania’s Inflation Path in 2025
| Year | Average Annual Inflation | Status | Year-on-Year Change |
| 2021 | 3.7% | Moderate/Baseline | - |
| 2022 | 7.3% | Very High | +3.6 pp |
| 2023 | 6.8% | High | -0.5 pp |
| 2024 | 2.1% | Low/Stable | -4.7 pp |
| 2025 (Jan-Nov) | ~6.0% | Rising | +3.9 pp |
Key Observation: The data reveals a cyclical pattern with a major spike in 2022, gradual decline through 2023-2024, and a sharp rebound in 2025.
The table below shows how food prices have increased relative to the 2020 base year:
| Month | 2021 | 2022 | 2023 | 2024 | 2025 |
| January | 100.60 | 106.99 | 117.57 | 119.39 | 125.77 |
| March | 103.93 | 110.64 | 121.39 | 123.05 | 129.75 |
| June | 106.46 | 112.71 | 121.49 | 122.58 | 131.53 |
| September | 103.30 | 111.89 | 118.17 | 121.17 | 129.70 |
| December | 105.90 | 116.15 | 118.83 | 124.27 | - |
| Cumulative Increase | +5.9% | +16.2% | +18.8% | +24.3% | +31.5% (Nov) |
Analysis: Food prices have increased by 31.5% cumulatively since the 2020 base year, representing significant erosion of purchasing power for households.
The year 2022 represented the peak of food inflation pressure:
| Category | Peak Inflation Rate | Month Recorded |
| Food & Non-Alcoholic Beverages | 9.7% | December 2022 |
| Unprocessed Food | 12.7% | December 2022 |
| Food Crops & Related Items | 14.2% | December 2022 |
Impact: The 2022 crisis saw double-digit inflation in key food categories, severely impacting household budgets and food security.
2023 - Gradual Stabilization:
2024 - Exceptional Stability:
Monthly Inflation Rates - 2025:
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov |
| 5.3% | 5.0% | 5.4% | 5.3% | 5.6% | 7.3% | 7.6% | 7.7% | 7.0% | 7.4% | 6.6% |
Key Characteristics:
| Category | 2022 Peak | 2023 Avg | 2024 Avg | 2025 (Nov) | Volatility |
| Food & Non-Alcoholic Beverages | 9.7% | 6.8% | 2.1% | 6.6% | High |
| Food Crops & Related Items | 14.2% | 11.3% | -0.4% | 5.4% | Very High |
| Unprocessed Food | 12.7% | 9.5% | 0.3% | 7.0% | Very High |
| Processed Food (implied) | ~6-7% | ~5% | ~3% | ~6% | Moderate |
Unprocessed Food - 2024-2025 Volatility:
| Period | Inflation Rate | Change |
| June 2024 | -1.3% | Price decreases |
| July 2025 | 8.9% | Sharp spike |
| Total Swing | 10.2 percentage points | Extreme volatility |
Food Crops Index - Monthly Pattern:
| Month | 2024 | 2025 | Difference |
| January | 0.7% | -1.5% | -2.2 pp |
| April | 0.8% | -0.9% | -1.7 pp |
| July | -0.9% | 3.5% | +4.4 pp |
| November | -4.0% | 5.4% | +9.4 pp |
Insight: Food crops show extreme seasonal and year-to-year variations, making them the primary driver of overall food inflation volatility.
| Measure | Food Inflation | Overall (All Items) Inflation | Gap |
| November 2025 | 6.6% | 3.4% | +3.2 pp |
| 2025 Average | ~6.0% | ~3.3% | +2.7 pp |
Critical Finding: Food inflation is running at nearly DOUBLE the overall inflation rate, indicating specific supply-side pressures in the food sector.
Energy & Fuel Impact:
| Year/Period | Energy & Fuel Inflation | Impact on Food |
| 2022 | 9.1% annual average | High transport costs |
| 2023 | 2.3% annual average | Stabilizing |
| 2024 | 9.3% annual average | Rising pressure |
| 2025 (Nov) | 3.8% | Moderate pressure |
Transport Costs:
| Index Level | 2021 | 2022 | 2023 | 2024 | 2025 (Nov) |
| Transport Index | 103.34 | 109.63 | 112.72 | 117.42 | 121.50 |
| Year-on-Year Change | - | +6.1% | +2.8% | +4.2% | +3.5% |
Impact: Rising energy and transport costs directly increase food distribution expenses, passed on to consumers.
Agricultural Production Instability:
Market Structure Issues:
| Factor | Impact Level | Description |
| Population Growth | Medium | Steady demand increase 2-3% annually |
| Urbanization | Medium | Shift to purchased food vs subsistence |
| Income Growth | Low-Medium | Changing consumption patterns |
| Dietary Changes | Low | Gradual shift to processed foods |
| Problem | Evidence | Severity | Trend |
| Persistent High Inflation | 6+ consecutive months above 6.5% in 2025 | HIGH | Worsening |
| Extreme Volatility | Unprocessed food: -1.3% to +8.9% swing | HIGH | Stable |
| Energy Cost Pressure | Fuel inflation 3.5-7.9% range | MEDIUM | Fluctuating |
| Food-Overall Gap | Food 6.6% vs Overall 3.4% | MEDIUM-HIGH | Widening |
| Seasonal Vulnerability | Consistent Jun-Aug peaks | MEDIUM | Predictable |
Detailed Monthly Projections:
| Month | Forecast | Range | Key Drivers | Risk Level |
| January | 6.8% | 6.5-7.0% | Post-holiday demand, carryover from 2025 | Medium |
| February | 6.2% | 5.8-6.5% | Pre-harvest tightening, seasonal low | Medium |
| March | 6.5% | 6.2-6.8% | Supply anticipation, input cost increases | Medium |
| April | 7.0% | 6.7-7.3% | Lean season begins, stocks depleting | Medium-High |
| May | 7.5% | 7.2-7.8% | Peak lean season, pre-harvest price spikes | Medium-High |
| June | 8.0% | 7.5-8.5% | Supply tightening, early harvest delays | High |
| July | 8.5% | 8.0-9.0% | ANNUAL PEAK - typical seasonal high | High |
| August | 8.0% | 7.5-8.5% | New harvest begins, gradual easing | High |
| September | 7.2% | 6.8-7.5% | Harvest supplies increase, prices moderate | Medium-High |
| October | 6.8% | 6.5-7.2% | Post-harvest stabilization | Medium |
| November | 6.5% | 6.2-6.8% | Abundant supply, festival demand | Medium |
| December | 6.8% | 6.5-7.2% | Year-end demand, holiday effects | Medium |
Quarterly Summary:
| Quarter | Average | Peak | Status |
| Q1 2026 | 6.5% | 6.8% (Jan) | Moderate start |
| Q2 2026 | 7.5% | 8.0% (Jun) | Rising pressure |
| Q3 2026 | 7.9% | 8.5% (Jul) | CRITICAL PERIOD |
| Q4 2026 | 6.7% | 6.8% (Oct/Dec) | Stabilizing |
| ANNUAL | 7.1% | 8.5% (Jul) | Moderate-High |
Food Categories - 2026 Projections:
| Category | Annual Avg | Peak Month | Volatility | Key Factors |
| Food & Non-Alcoholic Beverages | 7.1% | 8.5% (Jul) | High | Overall basket driver |
| Food Crops | 8.5% | 11.0% (Jul) | Very High | Weather dependency |
| Unprocessed Food | 9.0% | 11.5% (Jul-Aug) | Very High | Seasonal production |
| Processed Food | 5.5% | 6.5% (Jun) | Moderate | Input cost driven |
| Restaurants/Accommodation | 4.5% | 5.0% (Dec) | Low | Service component |
Other Influential Categories:
| Category | 2026 Forecast | Impact on Food |
| Energy & Fuel | 6.5-8.0% | High - transport costs |
| Transport | 4.0-5.0% | High - distribution |
| Housing/Utilities | 4.5-5.5% | Medium - overhead costs |
The Bank of Tanzania’s August 2025 review highlights Zanzibar’s steady economic progress, marked by inflation easing to 4.1% in July 2025 from 5.3% a year earlier, driven by lower food prices such as rice and sugar. On the fiscal side, the government collected TZS 93.4 billion in revenues and grants, exceeding its target, though expenditures of TZS 118.4 billion resulted in a TZS 25.0 billion deficit. In the external sector, exports of goods and services rose 12.4% to USD 328.2 million, supported by tourism and clove exports, while imports grew faster at 14.1% to USD 470.9 million, widening the trade deficit to USD 142.7 million. Together, these trends reflect resilience in tourism and trade, even as fiscal and external balances remain under pressure.
| Indicator | Jul 2024 | Jun 2025 | Jul 2025 |
| Headline Inflation (%) | 5.3 | 4.1 | 4.1 |
| Food Inflation (%) | 9.2 | 4.4 | 4.3 |
| Non-Food Inflation (%) | 2.4 | 3.9 | 3.9 |
| Monthly Inflation (%) | 0.2 | 0.5 | 0.2 |
| Item | Amount | Target/Share |
| Total Revenue & Grants | 93.4 | 106.6% of target |
| ├─ Own Revenue | 80.2 | 85.9% of total |
| └─ Grants | 13.2 | 14.1% of total |
| Total Expenditure | 118.4 | — |
| ├─ Recurrent | 79.9 | 67.5% |
| └─ Development | 38.5 | 32.5% |
| Fiscal Balance | -25.0 | Deficit |
| Item | 2024 | 2025 | % Change |
| Exports (Goods & Services) | 292.1 | 328.2 | +12.4% |
| ├─ Goods Exports | 85.1 | 100.8 | +18.5% |
| ├─ Services Receipts | 207.0 | 227.4 | +9.9% |
| Imports (Goods & Services) | 412.6 | 470.9 | +14.1% |
| Trade Balance | -120.5 | -142.7 | Deficit |
1. Inflation in Zanzibar
2. Government Budgetary Operations
3. External Sector Performance
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%).
The real sector encompasses economic activities producing goods and services, with GDP growth reflecting Zanzibar’s economic vitality.
Inflation measures the rate of price increases, affecting purchasing power and economic stability.
The government budget reflects fiscal policy, balancing revenues, grants, and expenditures to fund public services and development.
Trade performance reflects Zanzibar’s external sector, focusing on goods exports and imports, with services (e.g., tourism) covered separately.
The financial sector supports economic activity through credit provision and deposit mobilization, critical for private sector growth.
| Indicator | Value |
| Real GDP Growth (2024) | 6.8% |
| Headline Inflation (June 2025) | 3.4% (avg: 3.5%) |
| Domestic Revenue (TZS) | 874.9 billion |
| Total Spending (TZS) | 1,123.4 billion |
| Exports (Goods, USD) | 150.3 million |
| Imports (Goods, USD) | 459.5 million |
| Trade Deficit (Goods, USD) | 309.2 million |
| Credit to Private Sector (TZS) | 747.7 billion |
| Deposits in Banks (TZS) | 1,185.4 billion |
Tanzania’s food inflation is a significant component of its overall inflationary pressures, as detailed in the April 2025 Monthly Economic Review. Below, we compare food inflation with other key inflation components—headline, core, and energy, fuel, and utilities inflation—using specific figures from the document to highlight their relative levels, trends, and drivers.
Figure: Food inflation was 5.4% in March 2025, up significantly from 1.4% in March 2024.
Explanation:
Figure: Headline inflation was 3.3% in March 2025, up from 3.0% in March 2024.
Explanation:
Figure: Core inflation decreased to 2.2% in March 2025 from 3.9% in March 2024.
Explanation:
Figure: Energy, fuel, and utilities inflation increased to 7.9% in March 2025 from 6.6% in March 2024.
Explanation:
Figure: Unprocessed food inflation’s contribution to overall inflation has increased, while core inflation’s contribution has gradually diminished.
Explanation:
In March 2025, Tanzania’s food inflation (5.4%) is significantly higher than headline inflation (3.3%) and core inflation (2.2%) but lower than energy, fuel, and utilities inflation (7.9%). Food inflation, driven by maize, rice, and bean price hikes due to rain-related logistical issues, is a key contributor to overall inflation, alongside energy. Core inflation’s decline reflects easing non-food pressures, but the high food and energy rates highlight their volatility and impact on household costs. The NFRA’s 587,062-tonne food stock and 32,598-tonne release helped mitigate food inflation, keeping headline inflation within national and regional targets.
| Inflation Component | Key Figure |
| Food Inflation | 5.4% (Mar 2025, up from 1.4% in Mar 2024) |
| Headline Inflation | 3.3% (Mar 2025, up from 3.0% in Mar 2024) |
| Core Inflation | 2.2% (Mar 2025, down from 3.9% in Mar 2024) |
| Energy, Fuel, Utilities Inflation | 7.9% (Mar 2025, up from 6.6% in Mar 2024) |
| Food Reserves | 587,062 tonnes (Mar 2025, 32,598 tonnes released) |
| CPI Weight (Food & Non-Alcoholic Beverages) | 26.1% |
| CPI Weight (Energy, Fuel, Utilities) | 5.7% |
| CPI Weight (Core) | 73.9% |
Notes:
Tanzania’s economic performance in March 2025, as detailed in the April 2025 Monthly Economic Review, shows both alignment and divergence with global economic trends. Below, we compare Tanzania’s inflation, growth outlook, and commodity market influences with global forecasts, using specific figures to illustrate the relationship.
Global Trend: The IMF forecasts global inflation at 4.3% for 2025, declining to 3.6% in 2026, reflecting a slower-than-expected easing due to trade tensions and persistent pressures in advanced economies. Inflation is decreasing but remains above pre-pandemic levels in many countries.
Tanzania’s Performance: Tanzania’s headline inflation was 3.3% in March 2025, up from 3.0% in March 2024, driven by food (5.4%) and energy, fuel, and utilities (7.9%) price increases (Pages 3, 4, 5). Core inflation, excluding volatile items, fell to 2.2% from 3.9%.
Tanzania’s inflation is lower than the global forecast of 4.3%, aligning with the global trend of declining inflation. However, its food and energy-driven inflation spike mirrors global pressures from supply constraints and trade disruptions. Tanzania’s inflation remains within national and regional (EAC and SADC) targets, indicating stronger control compared to some advanced economies facing persistent pressures.
Global Trend: The IMF revised global growth downward to 2.8% for 2025 and 3.0% for 2026, from 3.3% for both years, due to trade tensions, unpredictable policies, and diminishing fiscal buffers. Risks include climate change and limited fiscal space in developing economies.
Tanzania’s Performance: The document does not provide a specific GDP growth rate for Tanzania in 2025 but notes that monetary policy supports economic growth while maintaining inflation below 5%. Domestic challenges include rising food and energy prices and logistical issues from seasonal rains.
Tanzania faces similar downside risks as the global economy, such as trade tensions and climate-related disruptions (e.g., heavy rains impacting food transport). However, its stable monetary policy (Central Bank Rate at 6%) and adequate liquidity suggest resilience compared to developing economies with limited fiscal space. Tanzania’s growth is likely moderated but supported by prudent policies, aligning with the global trend of cautious optimism.
Global Trend: Commodity markets show divergent trends:
Tanzania’s Performance: Tanzania, a commodity-dependent economy, is impacted by these trends:
Tanzania’s economy is closely tied to global commodity price movements. Positive trends (gold, palm oil) bolster exports, while negative trends (fertilizer, coffee, sugar) pose challenges. The drop in crude oil prices provides relief, aligning with global oversupply benefits, but domestic supply chain issues amplify food price pressures, diverging from global commodity price declines in some sectors.
Global Trend: The global economic outlook is tilted downward due to trade tensions, unpredictable policies, and climate change, particularly affecting developing economies with limited fiscal buffers.
Tanzania’s Performance: Tanzania’s monetary policy remains stable, with the Bank of Tanzania maintaining the Central Bank Rate at 6% and ensuring liquidity through interbank rate management (Page 5). The National Food Reserve Agency’s release of 32,598 tonnes of maize and paddy mitigated food inflation (Page 4). However, logistical challenges and climate-related rains increase costs.
Tanzania’s proactive policies align with global efforts to stabilize economies amid uncertainties. Its food reserve strategy counters global supply chain disruptions, and monetary stability mitigates trade tension impacts. However, climate change (seasonal rains) and limited fiscal space, common in developing economies, pose shared challenges.
Tanzania’s economic performance in March 2025 aligns with global trends in declining inflation (3.3% vs. 4.3% globally) and cautious growth outlooks, supported by stable monetary policy and commodity export strengths (e.g., gold). However, it faces unique pressures from food (5.4%) and energy (7.9%) inflation, driven by domestic logistical issues and global commodity price hikes (e.g., fertilizer). While global risks like trade tensions and climate change affect Tanzania, its prudent policies and food reserves provide resilience, positioning it favorably among developing economies.
| Indicator | Tanzania | Global |
| Headline Inflation | 3. Brodie3% (Mar 2025, up from 3.0% in Mar 2024) | 4.3% (2025 forecast) |
| Food Inflation | 5.4% (Mar 2025, up from 1.4% in Mar 2024) | Not specified |
| Energy, Fuel, Utilities Inflation | 7.9% (Mar 2025, up from 6.6% in Mar 2024) | Not specified |
| Core Inflation | 2.2% (Mar 2025, down from 3.9% in Mar 2024) | Not specified |
| Economic Growth | Not specified (monetary policy supports growth) | 2.8% (2025 forecast, down from 3.3%) |
| Central Bank Rate | 6% (unchanged in Mar 2025) | Not specified |
| Food Reserves | 587,062 tonnes (Mar 2025, 32,598 tonnes released) | Not specified |
| Gold Price | Benefits from global rise to USD 2,983.25/ounce (+3%) | USD 2,983.25/ounce (+3%) |
| Fertilizer Price | Impacts agriculture, global rise to USD 615.13/tonne (+2%) | USD 615.13/tonne (+2%) |
| Crude Oil Price | Benefits from global fall to USD 70.70/barrel (-4%) | USD 70.70/barrel (-4%) |
| Palm Oil Price | Supports edible oil sector, global rise to USD 1,069/tonne (+0.2%) | USD 1,069/tonne (+0.2%) |
| Coffee Price | Hurts exports, global fall by 2% | Down 2% |
| Sugar Price | Hurts exports, global fall by 1.5% | Down 1.5% |
Notes:
Tanzania’s food inflation rose to 5.4% in March 2025, a slight increase from 5.0% in February, but still remains below the country’s long-term average of 7.7% recorded between 2010 and 2025. This moderate inflation level reflects relative price stability in the country’s food sector despite global and regional challenges. Compared to its East African neighbors, Tanzania ranks 8th, performing better than Kenya (6.6%) and Ethiopia (11.9%), but trailing behind Uganda (2.0%) and Rwanda (3.5%). On a continental scale, Tanzania stands in the middle tier, significantly outperforming high-inflation countries like South Sudan (106%), Zimbabwe (105%), and Malawi (37.7%), indicating a relatively stable macroeconomic and food supply environment.
This shows that Tanzania’s food inflation is currently below its long-term average, suggesting moderate food price pressures compared to historical trends.
Tanzania ranks 18th out of 42 African countries listed in terms of food inflation (from highest to lowest), placing it in the mid-range.
Tanzania compares with selected East African countries:
| Country | Food Inflation (%) | Month | Rank (EA) |
| South Sudan | 106.0 | Oct/24 | 1 |
| Burundi | 38.7 | Feb/25 | 2 |
| Malawi | 37.7 | Mar/25 | 3 |
| Ethiopia | 11.9 | Mar/25 | 4 |
| Mozambique | 12.08 | Mar/25 | 5 |
| Zambia | 18.7 | Apr/25 | 6 |
| Kenya | 6.6 | Mar/25 | 7 |
| Tanzania | 5.4 | Mar/25 | 8 |
| Rwanda | 3.5 | Mar/25 | 9 |
| Uganda | 2.0 | Mar/25 | 10 |
Tanzania ranks 8th among East African countries based on current food inflation. It is lower than Kenya (6.6%), but higher than Uganda (2%) and Rwanda (3.5%).
| Rank | Country | Food Inflation (%) |
| 1 | South Sudan | 106.0 |
| 2 | Zimbabwe | 105.0 |
| 3 | Burundi | 38.7 |
| 4 | Malawi | 37.7 |
| 5 | Ghana | 26.5 |
| 6 | Angola | 25.3 |
| 7 | Nigeria | 21.8 |
| 8 | Zambia | 18.7 |
| 9 | Niger | 13.5 |
| 10 | Liberia | 12.7 |
These countries are facing severe food price pressures, likely due to economic instability, currency depreciation, or supply chain issues.
Summary Insights:
1. National Insights (Tanzania)
2. Regional Comparison (East Africa)
3. Continental Position (Africa)
Zanzibar’s economy grew by 6.2% in 2024, up from 5.6% in 2023, driven by tourism (7.1%) and construction (5.8%), while agriculture lagged at 3.5%. However, inflation rose to 4.3% in January 2025, fueled by higher food (+5.6%) and transport costs (+4.8%). The trade deficit widened to USD 387.4 million, as imports increased to USD 521.6 million (+4.5%), outpacing exports of USD 134.2 million (+2.9%). Despite a 5.2% rise in revenue to TZS 115.6 billion, government spending exceeded collections by TZS 22.3 billion, maintaining a budget deficit.
1. Zanzibar’s GDP Growth: Strong Expansion Driven by Services and Industry
Sectoral Growth Breakdown (2024 GDP Growth Rates)
| Sector | Growth Rate (%) | Key Contributors |
| Services | 7.1% | Tourism, trade, transportation |
| Industry | 5.8% | Construction, manufacturing |
| Agriculture | 3.5% | Cloves, seaweed, fishing |
| Overall GDP | 6.2% | Stronger than 2023 (5.6%) |
What It Means:
✅ Tourism and trade are driving economic expansion, supported by increased visitor arrivals.
✅ The construction sector is growing, boosting industrial performance.
⚠ Agriculture is growing slowly (3.5%), indicating the need for modernization and investment.
2. Inflation: Slight Increase Due to Rising Food and Transport Costs
What It Means:
⚠ Higher food prices are putting pressure on household purchasing power.
✅ Inflation remains moderate and within the acceptable range.
3. Trade Performance: Imports Rising Faster than Exports
Exports Grew but Remain Low Compared to Imports
Imports Increased, Widening Trade Deficit
What It Means:
⚠ Zanzibar remains a net importer, increasing reliance on foreign exchange inflows from tourism and remittances.
✅ Growth in clove and seaweed exports helps sustain the economy.
4. Government Revenue and Spending: Improved Collection but Budget Deficit Persists
What It Means:
✅ Revenue collection is improving, reducing reliance on external funding.
⚠ The government continues to spend more than it collects, increasing the need for budget control measures.
Summary of Key Trends in Zanzibar’s Economy (January 2025)
| Indicator | January 2025 | Comparison with December 2024 |
| GDP Growth (2024) | 6.2% | Up from 5.6% in 2023 |
| Inflation Rate | 4.3% | Up from 4.0% |
| Total Exports | USD 134.2 million | +2.9% |
| Total Imports | USD 521.6 million | +4.5% |
| Trade Deficit | USD 387.4 million | Widened |
| Revenue Collection | TZS 115.6 billion | +5.2% |
| Government Spending | TZS 137.9 billion | Budget deficit of TZS 22.3 billion |
🔹 Positive Signs:
✅ Economic growth remains strong (6.2%), driven by tourism and construction.
✅ Revenue collection is improving, reducing fiscal pressure.
✅ Clove and seaweed exports are supporting foreign exchange earnings.
🔸 Challenges:
⚠ Inflation is rising, increasing the cost of living.
⚠ Imports are growing faster than exports, widening the trade deficit.
⚠ Government spending exceeds revenue, creating a budget deficit.
1. Strong Economic Growth (6.2%) Driven by Tourism and Industry
What It Means:
✅ Tourism recovery is fueling service sector growth, increasing employment and foreign exchange.
✅ Construction and industrial expansion indicate long-term development and infrastructure improvements.
⚠ Agriculture is growing slowly (3.5%), meaning rural incomes and food security could be affected.
2. Inflation is Rising (4.3%), Driven by Higher Food and Transport Costs
What It Means:
⚠ The rising cost of living could reduce household purchasing power.
✅ Inflation remains manageable but needs monitoring to prevent further increases.
3. Trade Deficit Widening as Imports Outpace Exports
What It Means:
⚠ Zanzibar depends heavily on imports, making the economy vulnerable to global price fluctuations.
✅ Growing exports of cloves and seaweed help offset some trade losses.
4. Government Revenue is Growing, But Deficit Remains
What It Means:
✅ Tax revenues are improving, reducing reliance on external aid.
⚠ The government continues to spend more than it collects, requiring better budget management.
Overall Economic Implications
🔹 Positive Signs:
✅ Strong economic growth (6.2%) shows resilience and investment expansion.
✅ Tourism and construction remain key drivers of Zanzibar’s economy.
✅ Revenue collection is improving, supporting government operations.
🔸 Challenges:
⚠ Inflation is rising, increasing living costs for households.
⚠ Imports are outpacing exports, widening the trade deficit.
⚠ Government spending exceeds revenue, requiring fiscal adjustments.
The annual Headline Inflation in the EAC region was 6.7% in March 2024, up from 4.1% in February 2024. This figure indicates a region-wide increase in general prices.
For the EAC region, the annual average headline inflation for the fiscal year 2022/23 was 7.2%, up from 4.2% in the previous fiscal year.
Annual Core Inflation for the EAC region stood at 7.1% in March 2024, rising from 4.3% in February 2024.
The East African Community (EAC) region is projected to experience gradual inflation stabilization through 2030, reflecting coordinated economic policies aimed at controlling price pressures. In 2023, the EAC’s headline inflation stood at 6.7%, with variations across member states, from a low of 3.8% in Tanzania to a high of 26% in Burundi. Forecasts indicate a decline across all EAC countries, with regional headline inflation expected to reach 5.8% by 2030. Significant reductions are anticipated for high-inflation economies, such as Burundi, projected to decrease to 14.5%, and South Sudan to 10.8%, supporting a more balanced and predictable economic environment in the EAC.
The forecasted headline inflation trends for each EAC country through 2030 show a gradual decline across the region, reflecting stabilization efforts:
| Year | EAC Region | Burundi | Kenya | Rwanda | South Sudan | Tanzania | Uganda |
| 2023 | 6.7% | 26.0% | 7.7% | 12.2% | 22.5% | 3.8% | 5.4% |
| 2024 | 6.6% | 23.9% | 7.6% | 11.8% | 20.3% | 3.8% | 5.3% |
| 2025 | 6.4% | 22.0% | 7.5% | 11.5% | 18.2% | 3.8% | 5.2% |
| 2026 | 6.3% | 20.3% | 7.5% | 11.1% | 16.4% | 3.7% | 5.1% |
| 2027 | 6.2% | 18.6% | 7.4% | 10.8% | 14.8% | 3.7% | 5.0% |
| 2028 | 6.1% | 17.1% | 7.3% | 10.5% | 13.3% | 3.7% | 4.9% |
| 2029 | 5.9% | 15.8% | 7.2% | 10.2% | 12.0% | 3.7% | 4.8% |
| 2030 | 5.8% | 14.5% | 7.2% | 9.9% | 10.8% | 3.7% | 4.7% |
The projected Annual Average Headline Inflation for each East African Community (EAC) country and the region through 2030 shows a gradual reduction in inflation rates, with stabilization in most countries as economic policies are anticipated to moderate inflationary pressures:
| Year | EAC Region | Burundi | Kenya | Rwanda | South Sudan | Tanzania | Uganda |
| 2023 | 7.2% | 26.0% | 7.7% | 12.2% | 2.4% | 3.8% | 5.4% |
| 2024 | 7.1% | 23.9% | 7.6% | 11.8% | 2.3% | 3.8% | 5.3% |
| 2025 | 6.9% | 22.0% | 7.5% | 11.5% | 2.1% | 3.8% | 5.2% |
| 2026 | 6.8% | 20.3% | 7.5% | 11.1% | 2.0% | 3.7% | 5.1% |
| 2027 | 6.6% | 18.6% | 7.4% | 10.8% | 1.9% | 3.7% | 5.0% |
| 2028 | 6.5% | 17.1% | 7.3% | 10.5% | 1.8% | 3.7% | 4.9% |
| 2029 | 6.4% | 15.8% | 7.2% | 10.2% | 1.7% | 3.7% | 4.8% |
| 2030 | 6.3% | 14.5% | 7.2% | 9.9% | 1.6% | 3.7% | 4.7% |
The core inflation forecast for the EAC region and each country through 2030 reflects a gradual reduction in inflation rates as countries aim for economic stabilization:
| Year | EAC Region | Burundi | Kenya | Rwanda | South Sudan | Tanzania | Uganda |
| 2023 | 7.1% | 19.9% | 5.9% | 10.0% | 9.8% | 2.0% | 4.7% |
| 2024 | 6.9% | 18.1% | 5.8% | 9.6% | 9.1% | 2.0% | 4.6% |
| 2025 | 6.7% | 16.5% | 5.7% | 9.2% | 8.5% | 2.0% | 4.4% |
| 2026 | 6.5% | 15.0% | 5.6% | 8.9% | 7.9% | 2.0% | 4.3% |
| 2027 | 6.3% | 13.7% | 5.4% | 8.5% | 7.3% | 2.0% | 4.2% |
| 2028 | 6.1% | 12.4% | 5.3% | 8.2% | 6.8% | 2.0% | 4.0% |
| 2029 | 5.9% | 11.3% | 5.2% | 7.8% | 6.3% | 1.9% | 3.9% |
| 2030 | 5.7% | 10.3% | 5.1% | 7.5% | 5.9% | 1.9% | 3.8% |
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:
2. Growth Environment:
3. Sub-Saharan Africa's Macroeconomic Performance:
4. Risks to the 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.
Source: Africa’s Pulse October 2024 report