Rwanda’s economic outlook remains positive despite risks
Written by: Dias Nyesiga
Monday, August 12th, 2019, 2:02
Rwanda's economy kept a positive outlook that further fueled inclusive growth and reduced poverty, crucial indicators in steering the country towards a middle income and technology based economy.
Despite economic shocks, the International Monetary Fund-IMF says that Rwanda’s macroeconomic management has been strong and debt risks have remained low allowing room for growth expansion.
“Projections over the next five years have been revised up, to around 8.0 percent, based on first round effects of higher public investment spending agreed under the macroeconomic framework,” said Tao Zhang Deputy Managing Director at IMF.
According to IMF, the international fiancé watchdog, Real GDP growth reached 8.6 percent y-o-y in 2018 supported by activity in construction and services. whilst the economy is expected to grow at 7.8 percent in 2019 and 8.0 percent in 2020 export receipts growth from Made in Rwanda policy, continued public investments such as the Bugesera airport, as well as Rwanda’s ambitious efforts of implementing reforms to achieve its long-term development goals.
Again, Central bank indicates that the strong growth resulted into reduced poverty rate fell from 56.7 percent in 2005/06 to 39.1 percent in 2013/14, while income inequality, as measured by the Gini coefficient, decreased to 0.45 from 0.52.
Moreover, the country’s strong policy reforms have also provided an opportunity for increased investments and job creation mainly for the youth through favorable business environment.
“The central bank moved to a new interest-rate based monetary policy framework and, with inflation below its target range, eased the policy stance,” he noted urging that, “A more neutral medium-term fiscal policy stance can help, reinforced with commitments for more domestic revenue mobilization and mitigation of fiscal risks.”
Despite the growth experts say that Rwanda’s economic outlook is susceptible to balanced risks such as several large public and private ongoing investment projects which include peat power plant, tin smelting factory, new energy distribution substations and construction of new Special Economic Zones) and their potential impact on productivity, as well as enhanced regional trade ties, pose upside risks to growth.
While lower than expected ODA, commodity price changes, variable weather/climate change, and regional security issues pose accelerated potential downside risks.
The country’s trade deficit stood at 7.9 percent of GDP in 2018, compared to 7.8 percent in 2017 with this lower-than-expected deficit linked to delays in airport construction and more domestic production of construction materials. Import growth did pick up.
On the other hand, the Rwandan franc depreciated by 4 percent against the US$ in 2018 but expected to pick up by the end of 2019.