Tanzania’s economy defies odds with strong 2025 start

This performance, they say, reflects years of prudent policy management, continued public investment and a diversified economic structure that has helped shield the economy from external shocks.

While global economic conditions remain fragile—characterised by high interest rates, volatile commodity prices and geopolitical tensions—Tanzania’s economy has maintained momentum.

Analysts attribute this to a combination of domestic demand, infrastructure development and improved sectoral performance, particularly in agriculture, mining, tourism and services.

This resilience is underpinned by prudent macroeconomic management, sustained public investment and a diversified economic base.

Continued government spending on infrastructure and energy has supported domestic demand and improved productivity, while agriculture, mining, tourism and services have provided multiple engines of growth that cushion the economy from external shocks.

Public investment in roads, railways, ports and electricity has continued to stimulate economic activity, improve connectivity and lower production costs.

These investments have also strengthened Tanzania’s role as a regional trade and logistics hub, particularly within the East African Community (EAC) and the broader Great Lakes region.

At the same time, relatively stable inflation, a managed exchange-rate environment and cautious fiscal and monetary policies have helped preserve investor confidence and household purchasing power.

Analysts note that macroeconomic stability has remained a key anchor for growth, helping to maintain predictability for businesses and consumers alike.

Strong regional trade linkages within East Africa and ongoing reforms aimed at improving the business climate further position Tanzania to maintain steady growth, even as global financial conditions and geopolitical risks remain uncertain.

Measures to streamline investment processes, improve public service delivery and enhance regulatory efficiency have supported private sector activity.

In separate interviews, economic analysts noted that while overall performance remains positive, challenges around employment creation and inclusive growth continue to limit the broader impact of economic expansion.

They argue that ensuring growth translates into tangible improvements in livelihoods and remains a critical policy priority.

Bank of Tanzania (BoT) Governor Emmanuel Tutuba said Tanzania’s economy is maintaining a satisfactory growth trajectory, even as many economies worldwide struggle with slow growth, tight financial conditions and geopolitical pressures.

“Economic growth in the first, second, and third quarters of 2025 reached 5.8 percent, with average growth for the year projected at about 6 percent,” he said.

He noted that compared with the global growth benchmark of around 2 percent, Tanzania ranks among the better-performing economies. He noted that inflation has remained within the government’s target range of 3 to 5 percent, underscoring effective monetary policy and relative price stability.

“By the third quarter of the year, average inflation stood at 3.3 percent, helping to preserve household purchasing power and support business planning,” he said.

Mr Tutuba said price stability has been crucial in protecting consumers from sharp cost-of-living increases and enabling businesses to plan investment and production with greater certainty. He added that stable inflation also reflects disciplined monetary management by the central bank.

He said that the Tanzanian shilling has shown notable strength, appreciating by about 8 percent compared to the same period last year, from Sh2,550 to around Sh2,480 per US dollar.

“This performance has been supported by improved export earnings, increased gold production, and stronger foreign exchange inflows,” he said.

The BoT governor explained that improved export receipts, particularly from gold and tourism, have strengthened the country’s foreign exchange position and helped stabilise the currency. A stronger shilling, analysts say, has eased pressure on import prices and helped contain inflation.

He explained that Tanzania’s balance of payments position has also improved, standing at 2.4 percent of GDP, compared to 2.6 percent during the same period last year. Gold reserves have increased significantly, rising from about two tonnes in December last year to 16 tonnes this year, signalling stronger external buffers and improved economic fundamentals.

Analysts note that the accumulation of gold reserves enhances the country’s ability to withstand external shocks and reinforces confidence in the overall macroeconomic framework.

Independent economic analyst Oscar Mkude said 2025 has begun with strong momentum, with macroeconomic indicators remaining largely positive.

He noted that major international institutions, including the African Development Bank (AfDB) and the World Bank, project Tanzania’s growth at around 5.4 percent this year. “Improved price stability compared to 2024 has strengthened the economy’s resilience and boosted investor confidence,” he said.

He added that key productive sectors have performed well, particularly agriculture, which benefited from favourable food prices. While the electricity sector has been stable, helping to stabilise industrial production and save productive hours.

Mr Mkude said a stable power supply remains critical for manufacturing, agro-processing and services, as electricity disruptions often translate into production losses and higher operating costs.

Despite the positive macroeconomic outlook, analysts warn that growth has not translated into sufficient job creation. Employment growth remains limited, leaving many citizens without stable income opportunities and reducing the impact of growth at the household level.

“Much of the expansion has been driven by capital-intensive sectors such as mining and large infrastructure projects, which generate relatively few jobs.

As a result, many people remain spectators rather than active participants in economic growth, leading to unutilised labour and limited social gains,” he said.

He stressed that unemployment and underemployment, particularly among young people, remain major concerns, raising questions about the inclusiveness and long-term sustainability of current growth patterns.

Independent analyst Christopher Makombe echoed this assessment, noting that Tanzania’s economy has expanded by around 5.8 percent above the Sub-Saharan African average. He attributed the growth to recovery in tourism and sustained investment in construction and infrastructure, mining, trade and services.

Inflation, he said, has remained low and stable at around 3–4 percent, supported by prudent monetary policy and relatively stable food prices. He further noted that government investment in transport, energy and port infrastructure has strengthened Tanzania’s position as a regional logistics and trade hub.

Prof Abel Kinyondo of the Dar es Salaam University College of Education (DUCE) said that while the global economy in 2025 is performing relatively well and Tanzania is doing better than many of its peers, caution is needed when looking toward 2026.

“Overall, while Tanzania’s economic outlook in 2025 remains positive, experts agree that the next phase of policy focus must shift from growth alone to inclusivity, ensuring that economic gains are widely shared and sustainable over the long term,” he said.

A lecturer at the University of Dodoma (UDOM), Dr Lutengano Mwinuka noted that Tanzania has formulated a five-year national development plan aligned with Vision 2050, designed to provide a clear, coherent, and long-term strategic pathway for national growth.

“A nation that plans with vision today builds the foundation for sustainable prosperity tomorrow.”

A senior lecturer in the Department of Finance at the University of Dar es Salaam Business School, Dr Tobias Swai said this year’s economic performance has been encouraging, with key indicators reflecting positive progress in industrial development and infrastructure expansion. “

Major investments in transport and logistics are beginning to yield tangible results. The standard gauge railway is fully operational, port throughput has increased, and the completion of the Kwala Port has strengthened trade capacity.

Together, these developments are improving supply chain efficiency, reducing logistics costs, and contributing to overall economic growth and prosperity,” he said.