Rwanda’s economic growth is expected to pick up in the second half of 2017 but the World Bank (WB) casts doubt on achieving averaged annual projections of 6.2 percent. The growth slowed down to 6 percent in 2016 and further plummeted to 4.2 percent in the first quarter of 2017.
Launching the 10th edition of World Bank Rwanda Economic Update in Kigali on Wednesday, WB Senior Economist Mr. Aghassi Mkrtchyan said “For 2017, the growth is expected to accelerate in the second half of 2017 but achieving the target of 6.2 percent will be hard.”
Main risks include weak private sector investment, less than expected returns from large public and private investments in MICE (Meetings, Incentives, Conferences and Exhibitions) and volatile external environment. However, there are also factors positively affecting the growth outlook such as exchange rate that is closer to equilibrium, recovery in the prices of commodities exported by Rwanda and recovery in agriculture, according to WB’s report.
“Returning to a higher growth trajectory in 2018 is attainable although there are risks. In the medium term, economic activity will benefit from expected recovery of prices of traditional exports including minerals, tea and coffee. A more competitive exchange rate will support the non-traditional tradable activities under “Made in Rwanda” initiative. On balance, outlook in agriculture is positive although adverse climatic events pose risks,” reads the report.
Rwanda had notched up an average growth of around 8 percent from 2001 to 2014 but slowed down to 6.9% in 2015 and further to 6% in 2016. Agriculture grew in by 3.9% in 2016 compared to 5% in 2015. In the first quarter of 2017, agriculture further slowed down to 2.6%. Industry growth slowed to 6.8% from 8.9%, manufacturing and mining maintained 6.8% and 7.7% respectively while services slowed to 7.4% in 2016 from 10.4% in 2015.The annualized growth rate in services was 6% in the first quarter of 2017.
The report, however, states that “the country has entered the third decade of uninterrupted economic growth and social progress… on the back of Rwanda’s strong commitment to good governance, principles of market economy and openness.”
According to WB Senior Economist Mr. Aghassi Mkrtchyan, “although Rwanda’s export sector is still small, the progress made in the last decade sends a clear message that an export-led growth is within reach for Rwanda and country’s long-term growth strategy should continue focusing on strengthening economy’s capacity of producing exportable goods and services.”
From a very low base, Rwanda’s exports have increased four-fold in the last decade from $400 million in 2007 to $1.6 billion in 2016.