Rwanda’s economy grew by 5.9 per cent in 2016 with gross domestic product at current prices estimated at Rwf6,618 billion, up from Rwf5,956 billion in 2015.
However, the growth fell just short of the 6.0 per cent projected by the Ministry of Finance and Economic Planning as well as the International Monetary Fund. The growth was also slower compared to 6.9 per cent registered in 2015.
According to the National Institute of Statistics of Rwanda (NISR) director-general, Yusuf Murangwa, the failure to meet the projected performance is largely due the performance of the agriculture sector, which performed minimally in the second half of the year due to prolonged drought and floods in some parts of the country.
The agriculture sector posted 5 per cent growth rate in harvest season A but low performance in harvest seasons B and C at about one per cent.
The main drivers for growth in 2016 were industry and service sectors, which both grew at 7 per cent.
Local industries, buoyed by Made-in-Rwanda campaign, grew 10 per cent, while processing increased by 8 per cent.
Production of construction materials such as cement, which falls under non-metallic minerals, grew by 21 per cent.
In the service sector, the main agents for growth were hotels and restaurants, which grew by 11 per cent largely owing to the developments in the Meetings Incentives Conferences and Exhibitions initiative as well as an addition to facilities in the country.
Transport activities, which also fall under the service sector, grew by 8 per cent boosted by air transport as the national carrier, RwandAir, spreads its wings further.
The service sector contributed 48 per cent of total GDP with the agriculture sector contribution dropping from 33 per cent to 30 per cent.
The Minister for Finance and Economic Planning, Amb. Claver Gatete, explained that the changes were in line with the country’s progress and ambitions to shift towards becoming a service and knowledge-based economy and become increasingly industrialised.
With inflation steadily rising in the last three months, there has been concerns on what it could mean for the national economic growth.
Battling rising inflation
According to the consumer price index monthly report, released last week, inflation rate increased by 8.1 per cent in the month of February after a 7.4 per cent increase in January.
The inflation, which is attributed to food prices, was expected to come down beginning December last year, with the central bank projecting it would drop to about 6.0 per cent by the end of December 2016 and about 5.7 per cent in the first quarter of 2017.
Commenting on the inflation and mitigation efforts, Minister Gatete said they were studying trends to narrow down on the exact reasons behind increase in prices for specific products at the national level before rolling out response measures.
Although the inflation is as a result of drought across the region and unreliable rains patterns, he said, by narrowing down on the exact trouble spots, the government can mitigate the price fluctuations and consequently inflation’s impact on the economy.
“After receiving the numbers, we are trying to pin-point where the issues are such as the issue of bananas, potatoes, maize, cassava, in the food sector we can narrow down to where the issue is. If it is an issue of re-distribution, we have our own storage, we have the Rwanda Grain Council and the East African Commodities Exchange. That way, we can be able to move food from one place to another for the price to be moderate. We are taking measures, to see how we can deal with it,” he said.
Economists say that the 2016 GDP ought to inform actions to be taken to maintain economic growth that the country has been experiencing in recent years.
Teddy Kaberuka, an independent economist based in Kigali, told The New Times that the shrink in GDP growth largely due to the performance in the agriculture sector shows that more ought to be done in the sector as part of the manufacturing sector is also dependent on it.
He said it was probably time to consider modern agricultural practices and adoption of technology in the sector to reduce instances of food insecurity.
On the increase in the service sector contribution and the agriculture sector drop, Kaberuka said it was possibly an early sign of changes toward becoming a service led economy but warned that it was still too early to celebrate.
“The service sector is expected to continue registering positive progress, especially with the latest addition to the hospitality sector as well as RwandAir’s expansion,” he said.
The economist said that further growth was expected in the industry sector as more investors continue to capitalise on the Made-in-Rwanda campaign, which encourages consumption of locally made products.
The issue of promotion of local products was on the agenda of the recent National Leadership Retreat, where top government officials resolved to boost local industries to reduce imports and increase exports.