Domestic economy expected to recover from negative impact of COVID-19

On 23 February 2021 at 11:13

The National Bank of Rwanda (BNR) has revealed that Rwanda’s economy is expected to recover from the negative impact of COVID-19 supported by policy interventions to revive business activities, despite the uncertainty around the pandemic and its containment measures.

It has been revealed following the quarterly Monetary Policy Committee (MPC) meeting held on 18th February 2021.

The committee reviewed outcomes of its previous decisions and assessed the recent economic developments and the outlook at the global and national level.

Rwanda’s real GDP contracted by 4.1% in the first three quarters of 2020, compared to the growth of 8.3 percent registered in the corresponding period of 2019.

However the second half of 2020, recorded a gradual recovery, on the back of supportive policy measures and easing COVID-19 containment measures.

The statement released by BNR shows that estimated recovery is evidenced by the rising trend of the real Composite Index of Economic Activities (CIEA), which increased by 9.4% in the second half of 2020 from a contraction of 2.1 percent recorded in the first half of 2020.

“This domestic economic recovery is expected to continue in 2021, supported by policy interventions to revive business activities, despite the uncertainty around COVID-19 and its containment measures. The rollout of the COVID-19 vaccine globally and in the country will also enhance private sector optimism, hence stimulating the recovery in economic activities,” reads the statement in part.

BNR has also revealed that the monetary sector remained resilient in 2020, owing to supportive policy measures, amid, subdued demand for loans by the private sector during lockdown.

Broad money grew by 18.0 percent in 2020 compared to 15.4 percent recorded in 2019, supported by the increase in the outstanding Credit to the Private Sector (CPS) which grew by 21.8 percent from 12.6 percent the previous year.

The expansion in CPS was essentially driven by restructuring of loans granted to borrowers whose activities have been negatively affected by the pandemic, and new authorized credit disbursed in 2020.

Among others, foreign exchange market remained stable, whereby, the Rwf depreciated by 5.5 percent year-on-year as of December 2020 against the USD from a depreciation of 4.9 percent in December 2019.

The statement shows that pressures of the Rwandan Franc came during the second half of the year, following the resumption of economic activities and the increase in the demand for foreign currencies amid lower foreign inflows. However, the foreign exchange market is expected to remain stable, with adequate foreign exchange reserves held by NBR covering 5.9 months of imports as of December 2020.

According to estimates published by International Monetary Fund (IMF) in January 2021, the global economy contracted by 3.5 percent in 2020, owing to negative impact of COVID-19. In 2021, the global economy is expected to recover and grow by 5.5%.

However, the strength of the recovery is expected to be uneven and unequal across countries depending on factors like; access to vaccines, effectiveness of policy support, exposure to cross-country spillovers, and preexisting economic conditions.

Rwanda's economy is expected to recover despite the uncertainty around COVID-19 and its containment measures.