Rwanda’s GDP “capped” at 6.2 %: Is that all for Rwanda?
Written by: George Kalisa
Monday, October 2nd, 2017, 10:21
Rwanda’s gross domestic product (GDP) is projected to be downwards of 6.2 per cent in 2017 according to the latest World Bank report. The report says Rwanda can achieve its ambitious target of a middle-class economy by 2050 if it only maintains the average growth rate of the last two decades, but recording a scathing 4.2 per cent growth rate in the first quarter of 2017 was a setback, indeed.
Experts now contend that the country that has improved from the seventh poorest nation in world in 2000 to the 20th in 2015, should direct more efforts to further reverse the growing external imbalances, maintain single-digit inflation at the backdrop of “food price shocks and a sizeable exchange rate depreciation”.
Fortunately, the first quarter of 2017 gives Rwandans a glimpse of hope as the statistics indicate that the “widening trend of external imbalances have already been reversed” Experts say Rwanda urgently needs macroeconomic adjustments of both the fiscal and external imbalances, the later had gradually swollen.
“Growth in 2016 slowed down to around 6 percent, reflecting the need to address growing external imbalances through fiscal restraint and greater exchange rate flexibility,” says the report.
As things stand now, there is urgent need by Rwanda’s guru in economics to re-orient forces that critically determine production and consumption [read demand] if the east African nation is to ready itself to perform against the odds and/or encounter unforeseen hiccups of economic nature. By reading the writing on the wall Rwanda will certainly maximize her economic performance to clock the projected growth rate [WB] of 6.2 per cent and/or gain growth rate upwards.
This economic diagnosis is incumbent upon WB’s report that pinpointed weak growth in private consumption and dwindling production in the agriculture, construction, manufacturing and service sectors among others.
The World Bank attributed Rwanda’s improvement in global income ratings to unswerving commitment to good governance, the principles of market economy and openness.
Going sector by sector this report indicates slackening trend in nearly all sectors, the agriculture sector included. Notably, over 60 per cent of Rwandans directly or indirectly depend on this sector hence its centrality in the Rwandan economy.
The resilient sector registered growth rate of 3.9 per cent in 2016 and 2.6 per cent in the first quarter of 2017 compared to 5.0 per cent in 2015. This implies that the sector faced a sharp decline in growth of nearly 50 per cent. Harsh weather conditions were largely blamed for the poor performance of this sector.
Rwanda’s industry declined from 8.9 per cent in 2015 to 6.8 per cent in 2016 while manufacturing and mining maintained their annualized growth rate of 6.8 per cent and 7.7 per cent respectively, the report said. The construction sub-sector whose capacity is still underutilized and sank by 0.2 per cent in the same period was quoted as a major hitch in Rwanda’s industry sector.
However, the “made in Rwanda” campaign may impact positively on the manufacturing sector and economic analysts may not bat an eyelid when the sector registers a rise in its performance in the second quarter.
The service sector whose annualized growth was as low as 6.0 per cent in the first quarter of 2017 is yet another sector that suffered a slowdown in 2016 by registering growth of 7.4 per cent down from 10.4 per cent in 2015.
Why a shortfall in demand?
Economic analysts at the World Bank said Rwandan government adjustment programme that involves slashing down public investments and depreciation of the exchange rate are key factors in registering a dwindling demand; blaming the later for the diminishing growth in private consumption.
“On the demand side, Rwanda saw a slowdown in growth rates of both consumption and investments in 2016. Growth in private consumption slowed as a result of depreciation of the exchange rate, while the government largely maintained the rate of growth in public consumption of recent years. Investment growth also slowed down, mostly as a result of slow growth in public investments as part of authorities’ adjustment programme and fiscal restraint for 2016 and 2017,” says the report in parts.
Is that all for Rwanda?
The rain season has started in Rwanda a factor that is likely to reverse the production trend in especially the agriculture sector. Low production in 2016 and in the first quarter of 2017 was largely blamed on the prolonged dry spells that characterized a large part of 2016. This situation had been aggravated by unfavourable prices of Rwandan exports at the global market.
Rwanda can as well turn to its comparative advantages like tourism that fetches the largest portion of foreign exchange into the country. The country has apparently read the writings on the wall by redirecting more resources into the sector and conceiving several initiatives that have upgraded this sector.
Rebrading the sector is now in full gear as it recent initiative dubbed Meetings, Incentives , Conferences and Events (MICE) starts to pay off.
The hotel sub-sector has hosted new hotels with many 5* hotels like the Radisson Blu Hotel & Convention Centre Kigali.
Rwanda Development Board (RDB), the country’s development body in conjunction with the African Parks has recently repopulated the Akagera National Park through restocking endangered animal species that were nearly at the brim of extinction at the park. About eighteen black rhinos shortly following the arrival of seven lions from South Africa.
These initiates augment the country’s efforts to brand Kwita Izina [the baby gorilla naming ceremony] an international tourism event the country midwifed 13 years ago. It now attracts tens of thousands of both local and international tourists, including international celebrities. Congrats the 50-year old, Dian Fossey Gorilla Fund International/Dian Fossey that has spared no efforts towards the promotion of Gorilla conservation in Rwanda.
In a nut shell, Rwanda’s enabling investment, good governance sandwiched by the principle of zero tolerance to corruption, the new and enthusiastic cabinet, its centrality in the region where countries like the Democratic Republic of Congo (DRC) depend on it for their imports a magic is still expected for her performance to be better than 6.2 per cent, the highest projection by the World Bank.