Analyses & Studies

Report | EAIO Economic Newsletter - Structure of economies in EAIO

The monthly East Africa and Indian Ocean study has been published by the French Treasury. This study focuses on structure of economies in EAIO.

The economies of East Africa and the Indian Ocean (EAIO) display varied levels of wealth and economic structures, yet they share common challenges in terms of diversification and development. While wealthier countries, such as Mauritius and Seychelles, rely on robust service sectors, poorer nations, like Burundi and Somalia, depend on lowproductivity primary sectors. Agriculture, although low in productivity, remains crucial in the region, employing a significant portion of the population and making a strong contribution to exports in countries like Kenya, Ethiopia, and Madagascar. The services sector, which accounts for 48% of the EAIO's GDP, stands out for its dynamism, particularly in tourism and digital sectors. Industrial development remains limited, with several countries focused on extractive industries, making them vulnerable to commodity price volatility. Furthermore, widespread informality and high-income inequality reflect ongoing development challenges, as does the reliance on remittances in some economies. Although diversification is a priority across the EAIO, progress is uneven, hindered by armed conflicts and political instability affecting several countries, as well as infrastructure deficits and limited fiscal space.

Focus on Tanzania:

Tanzania's economy, the 2nd largest in the East African Community (EAC), is driven by tourism. Progress in terms of economic diversification is relatively limited, but the country's industrial development is significant. Agriculture, which provides around 65% of jobs, remains an essential pillar of the economy. Despite initial progress in implementing structural reforms, governance remains weak, with corruption and inefficient institutions hampering economic diversification.