Tanzania’s economy is continuing to expand at a strong pace, but the latest World Bank assessment shows that the growth is yet to translate into significant improvements in household incomes and poverty reduction.

The economy grew by 5.9 percent in 2025 and reached 6.0 percent growth in the first quarter of 2026. The World Bank projects growth of 6.1 percent for 2026 and about 6.5 percent over the medium term.

Despite that performance, poverty remains widespread. The report estimates that 69.8 percent of Tanzanians live below the World Bank’s international standard for lower-middle-income countries $4.20-a-day poverty line, only marginally lower than the 70 percent recorded in 2018.

The figures highlight a growing concern for policymakers since while Tanzania has maintained relatively strong economic growth for years, improvements in household welfare have been much slower as the real private consumption per person has grown by just 0.2 percent a year.

Tanzania has recorded average annual economic growth of about 5.7 percent over the past two decades. The World Bank says much of that expansion has been driven by the accumulation of resources rather than gains in productivity. 

That has limited the economy’s ability to generate the higher incomes and better employment opportunities needed to reduce poverty more rapidly.

The situation is particularly evident in the labour market.

The World Bank says Tanzania’s challenge is not simply a lack of jobs, but the quality and productivity of the jobs available. The employment-to-population ratio stood at 68.7 percent in 2024, meaning more than two out of every three working-age Tanzanians were employed.

However, many of those jobs provide low and irregular incomes.

Median hourly earnings were about TZS 1,005, equivalent to roughly US$0.40. Around 75 percent of workers were own-account workers, while another 17 percent were contributing family workers. Only about 8 percent were employees.

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Agriculture remains the country’s largest source of employment, accounting for 54 percent of the workforce.

The sector grew by 4.1 percent in 2025, compared with growth of 6.7 percent in services and 6.8 percent in industry.

The World Bank says improving agricultural productivity will be critical to raising incomes, particularly because so many Tanzanians depend on farming.

However, existing support does not always reach those who need it most. The report notes that fertilizer subsidies tend to benefit more farmers with larger landholdings who are already more likely to use intensive farming methods. The poorest 20 percent of farmers are three times less likely than the richest 20 percent to use inorganic fertilizer.

The government’s role in driving economic activity has also increased

More than two-thirds of Tanzania’s economic growth in 2025 came from government spending, compared with an average of 45 percent between 2021 and 2024.

Government primary expenditure increased from 16.3 percent of GDP in 2024 to 17.8 percent in 2025, with spending rising ahead of the October 2025 elections.

The World Bank says the increase in government spending supported economic activity, but sustaining growth will require stronger private-sector investment and productivity.

The private sector continues to face several constraints. Labour productivity among formal firms in Tanzania is estimated to be about 50 percent below that of Sub-Saharan African peers in services, and the gap is even wider in manufacturing.

The World Bank argues that improving the environment for private investment, strengthening access to finance and land, and improving firms’ ability to enter, grow and exit markets will be important for creating more productive businesses and better jobs.

At the same time, households are facing additional pressure from rising costs.

The report says the war in the Middle East has pushed up energy and freight costs, with potential consequences for transport and food prices. Domestic diesel prices increased by about 60 percent between the beginning of the conflict and June 2026, despite government efforts to cushion consumers through fuel subsidies.

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It recommends strengthening targeted social protection instead. Tanzania currently spends about 0.7 percent of GDP on social assistance, less than half the Sub-Saharan African average of 1.6 percent.

The World Bank says an expanded social registry could help the government identify and support vulnerable households more effectively.

It also identifies investment in human capital as a key priority. Learning-adjusted schooling in Tanzania averages 4.5 years, while more than half of workers are in rural and informal employment, where access to skills, finance and productive opportunities remains limited.

The outlook for the economy remains positive. Growth is expected to remain above 6 percent over the medium term, supported by continued investment and economic activity.

But the World Bank says maintaining that growth will require a shift towards higher productivity, stronger private investment, better skills and more effective social protection.

For Tanzania, the challenge is increasingly about what happens after the GDP figures are