Rwanda’s economy is expected to remain stable and resilient in 2017 despite the downside risks registered in 2016.
The central bank projects improvements in commodity prices and positive agriculture and export performance to give a boost to the country’s economic growth in 2017.
More so, the central bank is counting on Made-in-Rwanda campaign and increased local production to play a key role in keeping the economy sound and stable going forward.
Economy grew by 5.2 per cent during the third quarter of 2016, according to the central bank. The World Bank had earlier projected that it would grow by 6.8 per cent in 2016 and pick up to about 7.2 per cent in 2017.
But now the central bank says all indicators are pointing in the right direction giving reassurance and optimism that the economy will perform better this year.
Central bank governor John Rwangombwa said most of the commodity prices have already started to recover as noticed toward the end of 2016 and first few weeks of 2017.
“The trend is anticipated to continue in 2017,” he said, adding that improving demand, particularly in China, gives positive prospects for Rwanda’s external sector performance.
Rwangombwa was speaking during the quarterly Financial Stability Committee and Monetary Policy Review yesterday.
The governor said he expects pressure on local currency to ease in 2017, thanks to the expected improvement in Rwanda’s export receipts in line with a recovery in commodity prices.
“Though the bill for oil imports is expected to remain high, the overall import bill is likely to decline due to increased domestic production of goods such as cement that previously required a lot of forex to import, the Made-in-Rwanda initiative and the phasing out of some major construction projects,” he said.
Rwangombwa said the expected increase in export receipts and decline in the import bill will help lessen the exchange rate pressures, which will ease inflation through its dampening effects on imported inflation, which hiked from 1.1 per cent on average in 2015 to 4.7 per cent in 2016.
The Rwandan Franc depreciated by almost 9.7 per cent between December 2015 and December 2016, the highest level for the last decade.
However, the economy performed well in 2016. Real GDP grew by 6.1 per cent on average in the first three quarters of 2016, against 6.9 per cent recorded in the corresponding period of the previous year.
This good performance was mainly driven by the service sector, which contributed 49.7 per cent to the real GDP.
In 2016, central bank maintained lending rate at 6.5 per cent to ensure that the banking sector continued to finance economic activity while limiting inflationary pressure, Rwangombwa said.
The move saw a boost leading to an increase in total new authorised loans to the private sector by 6.3 per cent in 2016 compared to 13.7 per cent in 2015.
Total outstanding credit to the private sector expanded by 7.8 per cent in 2016, while broad money increased by 7.5 per cent.
BNR will continue to closely monitor lending activities to ensure adherence to proper credit analysis and monitoring to minimise non-performing loans, Rwangombwa (top) said.
Meanwhile, economists are confident the improvement in export receipts and the expected performance of economic activity will help to prop up the banking system liquidity.
This will help increase the capacity of banks to scale up their lending to the private sector, said Maurice Toroitich, the KCB Bank Rwanda managing director and chairperson of Rwanda Bankers Association.
Overall, the outstanding credit to the private sector is expected to increase by 16.3 per cent by end December 2017 from 7.8 per cent recorded in 2016.
This would further stimulate the economy creating more jobs and keeping the economy in good shape.
“However, we have to ensure we generate the right level of economic activity to stimulate demand for credit to keep the banking industry more sustainable,” Toroitich said.
Dr Diane Karusisi, Bank of Kigali, chief executive, said supporting the export sector will keep the economy competitive.
Karusisi expects banks to double support for exporters, especially the mining industry, to help keep the trend positive.
Alex Kanyankole, the Development Bank of Rwanda chief executive, urged stakeholders to collaborate and address existing gaps and risks in the sector.
He said increasing access to finance alone will not help unless stakeholders worked together to address other challenges.