Tanzania’s Economy Gains Momentum, but Better Jobs Hold the Key to Broader National Prosperity

Tanzania’s economy is growing steadily, but low-productivity agriculture and informal work leave many employed people earning too little. Business reforms, practical skills and better opportunities for women are central to turning growth into higher incomes and better livelihoods.

Tanzania's economy is expanding, but its next development challenge is ensuring that growth delivers better livelihoods. The World Bank's latest Tanzania Economic Update, featuring "Making Jobs Work", reports GDP growth of 5.9% in 2025 and forecasts expansion of 6.1% in 2026 and 6.5% over the medium term. Yet with nearly 69% of working-age people employed, inadequate earnings remain a concern. The policy challenge is to increase productivity and improve the quality of employment.

For government, businesses and development partners, this means looking beyond headline growth. Progress will depend on whether firms can expand, farmers can earn more and workers can access opportunities that provide a better living.

Growth on Paper, Pressure in Households

Finance, trade and transport have been major contributors to economic expansion, alongside increased government spending ahead of the October 2025 elections. However, growth in these activities does not automatically improve earnings for people working in low-productivity agriculture or informal enterprises.

This gap matters because household incomes influence consumption, access to essential services and resilience to financial shocks. When workers earn too little, employment offers limited protection against poverty.

Agriculture remains central to addressing this problem. The update identifies inefficient input markets, including fertilizer distribution, as constraints on productivity. Improving access to reliable inputs and markets could help smallholders increase earnings while supporting businesses involved in processing, storage and distribution.

For policymakers, the implication is to assess investments by their contribution to livelihoods as well as national output. Roads, market facilities and agricultural services become more valuable when they lower costs and connect producers with viable buyers.

For private firms, stronger rural purchasing power could expand demand. However, these benefits depend on farmers achieving profitable sales, rather than simply producing more at higher cost.

Small Businesses, Big Barriers

Tanzania's ability to create better jobs also depends on the strength of its private sector. The update reports that young firms account for 12% of registered businesses, compared with 38% in Rwanda. The comparison suggests limited entrepreneurial renewal, although definitions and reference periods require confirmation.

Complicated registration, limited long-term credit, insecure land rights and weak arrangements for resolving business failure discourage investment and expansion. Smaller firms face particular difficulties because they have fewer resources to manage administrative requirements or withstand delays.

Simplifying registration through digital platforms could reduce friction. Digitally accessible land records could improve legal certainty, while stronger business-failure procedures could make commercial risks more manageable.

Implementation will determine the results. Online systems need accurate information, accessible services and effective dispute resolution. Digitalising an inefficient procedure may preserve its underlying problems.

For investors and shareholders, predictable rules could strengthen confidence in expansion. For government, success should be measured through business survival, investment, productivity and employment growth, alongside new registrations.

Skills That Lead to Better Pay

Business reforms need a workforce strategy that connects learning with practical opportunities. Training alone cannot overcome weak demand for workers, while expanding enterprises may struggle if recruits lack foundational skills.

The report recommends linking social protection more closely with skills development and transitions into better employment. Recognising abilities acquired through informal work could help experienced workers demonstrate competence without repeating unnecessary training.

For employers, credible certification could make recruitment easier. Its usefulness would depend on reliable assessment and recognition by businesses.

Women require particular attention. Care responsibilities, occupational segregation and limited training access can restrict their movement into higher-quality employment. Childcare and flexible schedules could improve participation, but programs should also track subsequent earnings and job quality.

Development partners could support coordination between skills providers, employers and social protection institutions. Assistance aimed at improving future earnings should complement essential income support, especially where suitable jobs remain scarce.

Global Shocks Test the Jobs Agenda

External pressures could complicate Tanzania's efforts. The World Bank brief reports a current account deficit of 2.5% of GDP in 2026, linking pressures to higher energy and freight costs associated with the Middle East conflict. Its reporting period and status as an estimate or forecast require confirmation.

Higher costs can squeeze business margins and household purchasing power, potentially delaying investment and hiring. Diversifying exports beyond gold and tourism could improve resilience, but competitive alternatives require sustained investment.

The government therefore faces a balancing task: maintaining fiscal discipline while protecting services and investments that improve productivity. Public debt of 49% of GDP does not establish borrowing capacity without considering repayment costs and financing terms.

The next test is implementation. Funded plans, clear responsibilities and measurable improvements in real earnings, firm expansion and women's employment will reveal whether growth is reaching households. Which recommendations have been formally adopted remains unclear. For Tanzania, the decisive outcome is broader access to work that supports a better living.