Rwanda to experience 5-year accelerated economic growth

On 28 December 2020 at 11:35

Rwanda has emerged among countries with GDP forecasted to grow faster and efforts promising to mitigate COVID-19 pandemic. This has been indicated in the report of World Economic League Table (WELT 2020) which shows the difference between the world nominal GDP forecasts from last year’s WELT and this year’s amidst the pandemic that hit the world’s economy in 2020.

“Over the next five years, the annual rate of GDP growth is set to rise to an average of 7.2%. However, between 2026 and 2035, the Centre for Economics and Business Research Ltd (Cebr) forecasts that the average rate of GDP growth will dip slightly to 6.1% per year. In the coming 15 years,” reads in part WELT report.

The report shows that world’s economy was largely hit by Coronavirus pandemic with estimated $6 trillion gap in 2020.

Rwanda was also hit by the pandemic where the economy expanded by an estimated 2% against the expected 8% which is below 9.4% GDP growth recorded the previous year.

The country is however making good strides considering the scale of disruption across neighboring countries affected by the pandemic.

Rwanda has had a lower incidence of COVID-19 than many other countries, with 56 deaths recorded during the first 11 and half months of 2020. This amounts to less than 1 death per 100,000 people.

Despite national efforts to prevent the spread of COVID-19, WELT reports that global economic disruptions will also affect Rwanda as a country relying to smooth international trade.

Deficit in minerals’ trade is among areas that destabilized the economy. Tin, tungsten and tantalum, also known as 3Ts, are Rwanda’s top mineral exports. For years, the country has been one of the world’s leading exporters of these minerals.

However, the Covid-19 outbreak has hit commodity prices globally, driving a tumble in Rwanda mineral exports particularly 3Ts.

Statistics show that revenue exports of 3Ts decreased by 30.9 per cent due to the drop in international commodity prices in January and February 2020 compared to the same period in 2019.

Apart from 3Ts, the tourism sector (one of top contributors to the service sector which took 49% of the country’s GDP last year) was also affected due to COVID-19 preventive measures.

As of today, some mining activities, restaurants and bars have resumed in adherence with health guidelines but bars remain closed.

In 2014, Rwanda developed the Meetings, Incentives, Conferences and Events (MICE) strategy that seeks to make the country a top tourism and conference hub.

In the 2019/2020, Rwanda targeted $88 million in revenues from 147 conferences up from $65$ of last year.

COVID-19 restrictions has left of many hotels counting losses while some of new hotels have outstanding loans used to sustain operations. As of February 2020 before Coronavirus emerged in Rwanda, outstanding loans of the hotel sector stood at Rwf134 billion for 571 borrowers.

Domestic taxes were also affected by the lockdown and extended curfew hours that impacted businesses’ income.

For instance, Rwanda Revenue Authority (RRA) announced to have earned Rwf 1 516 billion against targeted Rwf 1 589 billion due to the pandemic.

The complexity of challenges emanating from the pandemic left the country seeking loans to mitigate COVID-19 effects and boost national development as well.

As per WELT report, Rwanda’s positive growth rate in 2020 highlights that the economic fallout from the pandemic has been far more limited than in most other countries.

Government debt as a share of GDP reached 61.6% in 2020, compared to 51.4% the previous year. This increase is attributable to the impact of the COVID19 pandemic on government spending and tax receipts.

Despite the pandemic’s effects, Rwanda’s economy is forecasted to grow and surpass the previous rate.

WELT indicates that Rwanda’s economy will grow faster due to the country’s ambitions to build national economy on promoted investments.

Rwanda has expended a lot of efforts to make the country a favorable business environment for investors.

This saw Rwanda becoming 38th in the World Bank’s 2020 Ease of Doing Business Index, indicating that the country’s regulatory environment has made significant strides forward relative to other comparable countries.

This year, the country has registered investment worth $1.2 billion for 127 projects expected to provide 22,000 job opportunities.

Apart from attracting new investors, the Government of Rwanda continues to roll out initiatives aimed at supporting businesses hit by the coronavirus pandemic.

These include efforts to diversify the country’s mineral exports where 17 firms have been recently granted exploration licenses, 13 received mining licenses while six companies were licensed to carry out quarrying activities.

Among others, the Government will roll out tax incentives, for two years, to help stimulate investments in the manufacturing and the construction sectors as well as speed up business recovery from the Covid-19 effects. The latter is to be effected from January 2021.

The manufacturing sector is expected to contribute 34% to DGP by 2024.

Rwanda’s economy is projected to grow faster over the next five years.