A Comprehensive Analysis of Tanzania's Economic Growth vs Job Creation Paradox (2018-2026)
Over the past decade, Tanzania has consistently recorded strong economic growth, positioning itself among the fastest-growing economies in Sub-Saharan Africa. Between 2018 and 2025, the country's Gross Domestic Product (GDP) expanded at an average rate of around 5-7 percent, recovering steadily after the COVID-19 slowdown and reaching approximately 5.6 percent in 2024 with projections of 6.0 percent in 2025 and 6.3 percent in 2026.
However, despite this robust growth performance, Tanzania is creating far fewer jobs than the number of people entering the labour market each year. Recent data show that while 900,000 to 950,000 new job seekers—mostly youth—enter the labour force annually, the economy generates only about 600,000 to 700,000 jobs, the majority of which are informal and low-productivity.
The number of formal jobs created each year remains extremely low, at only 50,000-60,000, leaving an annual employment gap of 300,000-400,000 people, projected to widen further in 2026 if current trends persist.
| Year | GDP Growth Rate | Jobs Created | Youth Unemployment | Annual Job Seekers | Job Gap |
|---|---|---|---|---|---|
| 2018 | 7.0% | 450,000 | 13.5% | 800,000+ | 350,000 |
| 2019 | 7.0% | 480,000 | 13.8% | 800,000+ | 320,000 |
| 2020 | 4.8% | 320,000 | 14.2% | 800,000+ | 480,000 |
| 2021 | 4.9% | 380,000 | 14.5% | 800,000+ | 420,000 |
| 2022 | 4.7% | 410,000 | 14.0% | 800,000+ | 390,000 |
| 2023 | 5.1% | 440,000 | 13.7% | 800,000+ | 360,000 |
| 2024 | 5.6% | 607,000+ | 13.7-14.0% | 850,000+ | 243,000-293,000 |
| 2025 | 6.0% | 650,000+ | 13.5-13.8% | 900,000+ | 250,000-350,000 |
| 2026 (Forecast) | 6.3% | 700,000+ | 13.3-13.5% | 950,000+ | 300,000-400,000 |
The structure of Tanzania's growth largely explains the employment paradox. High-growth sectors are capital-intensive and technology-driven, contributing significantly to GDP but generating very few jobs.
| Sector | GDP Share | Employment Share | Formal Jobs | Productivity | Job Creation Potential |
|---|---|---|---|---|---|
| Agriculture | 25-26% | 65% | 15% | Low | Low (needs transformation; grew 3% in 2024-2025) |
| Mining & Quarrying | 5-10% | 1% | 45% | Very High | Very Low (capital-intensive; 16.6% growth in 2024) |
| Manufacturing | 8-9% | 6-7% | 55% | High | Medium (if expanded; stagnant share since mid-1990s) |
| Construction | 12-13% | 8% | 35% | Medium | Medium-High (8% growth in 2024, projected 10% in 2025-2026) |
| Services | 42-43% | 28-29% | 60% | High | Medium (tourism and telecom drive; 3.8% ICT contribution in 2024) |
Mining recorded growth of over 16% in 2024, yet employs only about 1% of the workforce. Meanwhile, agriculture employs about 65% of the population but contributes only 25-26% of GDP and has grown at a modest 3%.
| Indicator | Value (2025) | Trend & 2026 Forecast |
|---|---|---|
| Working Age Population (15-64) | 38.5 million | Growing 3% per year; projected 39.6 million in 2026 |
| Total Labor Force | 34-36 million | Rapidly increasing; 36-37 million forecast for 2026 |
| Formal Employment | 4.0-4.1 million (11-12%) | Slow growth; ~4.2 million projected in 2026 |
| Informal Employment | 28-30 million (76-80%) | Growing; expected to remain dominant at 78-82% in 2026 |
| Unemployment Rate | 8.7-9.3% | Stable but high; forecast 8.5% in 2026 |
| Youth Unemployment | 13.5-14.0% | Above average; slight decline to 13.3% forecast in 2026 |
| Underemployment | 35-40% | Very high; persistent in informal sectors |
| Annual New Job Seekers | 900,000+ | Increasing; 950,000+ forecast in 2026 |
| Annual Formal Jobs Created | 50,000-60,000 | Insufficient; projected 60,000-70,000 in 2026 with reforms |
| Annual Job Gap | 800,000+ | Critical; widening to 850,000+ in 2026 |
| Problem | What It Means | Impact | Severity |
|---|---|---|---|
| Capital-Intensive Growth | Growth from sectors like mining (16.6% in 2024) and telecom using automation | High GDP but few jobs | Critical |
| Skills Mismatch | Graduates (700,000+ annually) lack employer-needed skills | Educated youth can't find work | High |
| Informal Sector Trap | 76-80% in informal jobs (up from 71% in 2023) with low pay/no security | Poor quality jobs, no advancement | High |
| Agricultural Underproductivity | 65% employed but only 25-26% GDP; slow 3% growth in 2024-2025 | Poverty trap, low incomes | Critical |
| Weak Industrialization | Manufacturing stagnant at 8-9% GDP/6-7% jobs despite 5-6% overall growth | Missing mass jobs opportunity | High |
| Youth Population Boom | 900,000+ youth enter market yearly (2025), rising to 950,000+ in 2026 | Growing crisis | Critical |
| Employment Type | Number (2025) | Percentage | Characteristics |
|---|---|---|---|
| Formal Private Sector | 2.8-2.9 million | 8% | Stable, benefits, taxed |
| Public Sector | 1.2-1.3 million | 3-4% | Government jobs |
| Informal Sector | 28-30 million | 76-80% | No contracts, no benefits |
| Subsistence Agriculture | 22-24 million | 60-65% | Farming for own consumption |
| Unemployed | 3-4 million | 8-9% | Actively seeking work |
| Total Labor Force | 34-36 million | 100% | - |
Action: Build factories, process raw materials locally (e.g., agro-processing)
Impact: Create 100,000s manufacturing jobs
Timeline: Medium-term (5-10 years)
Action: Reform vocational schools, match to jobs (e.g., tech/digital focus)
Impact: Better employment for graduates
Timeline: Short-term (2-5 years)
Action: Easier loans, less red tape, training
Impact: Small business growth; 500,000+ jobs by 2026
Timeline: Short-term (2-5 years)
Action: Modern farming, processing, value addition
Impact: Higher incomes, rural jobs
Timeline: Medium-term (5-10 years)
Action: Internet access, tech training, startups
Impact: New jobs; 215,000 tech roles by 2026
Timeline: Short-term (2-5 years)
Tanzania's experience clearly demonstrates that economic growth alone is not sufficient to solve unemployment. While GDP has continued to expand at 5-6 percent annually and is projected to reach 6.3 percent in 2026, the structure of this growth has failed to generate enough productive and decent jobs for the rapidly growing labour force.
With 900,000-950,000 new job seekers entering the market each year and only 50,000-70,000 formal jobs being created, the country faces a persistent and widening employment gap that leaves millions unemployed, underemployed, or confined to low-productivity informal activities.
The dominance of capital-intensive sectors, a stagnant manufacturing base, low agricultural productivity, and a skills mismatch between education and labour market needs has weakened the link between growth and job creation. As a result, the benefits of rising GDP remain unevenly distributed, particularly for young people, who continue to experience disproportionately high unemployment despite being the main drivers of labour supply.
Addressing this challenge requires a fundamental shift in Tanzania's development strategy—from growth that prioritizes output to growth that prioritizes employment, productivity, and inclusion. Expanding labour-intensive industries, transforming agriculture, strengthening SMEs, and aligning skills development with market demand are no longer optional but urgent necessities.
Without such reforms, Tanzania risks sustaining impressive macroeconomic growth figures while the employment crisis deepens, undermining social stability and long-term economic sustainability.