Potential impact of projected 7.2 per cent economic growth

Builders at a construction site in Kigali last year. File.
Builders at a construction site in Kigali last year. File.

The projected 7.2 per cent economic growth for 2018 will be felt by Rwandans in aspects such as increased job creation capacity by private sector, better returns, as well as an increase in tax receipts.

The International Monetary Fund and the Ministry of Finance and Economic Planning on Friday projected that the Rwandan economy will grow by about 7.2 per cent this year up from 6.1 per cent in 2017.

This is against the growth forecast of about 3.2 per cent for Sub-Saharan Africa region.

The main driving factors for the anticipated growth are the service sector, agriculture and a rebound of construction activities and the mining sector which last year saw a growth by over 210 per cent to fetch $248.5 million.

Among the impacts likely to be witnessed across the year is emergence and growth of enterprises in sectors such as service and agriculture.

Experts say that with increased activity anticipated in sectors such as agriculture and service, private sector players, both new and established, are likely to witness increased activity and income.

There is also likely to be increased job creation and retention capacities as operators witness increased activity.

This will be through new investments and expansion of existing enterprises.

This is expected to facilitate bid towards attainment of goals such as creation of about 200,000 off-farm jobs annually.

Last year’s total investments of about $1.675bn saw the creation of about 38,000 jobs in infrastructure, services, manufacturing, tourism, construction, real estate, agriculture and mining sectors.

Laura Redifer, the IMF Mission Chief, told this paper that among the areas to bank on in regards to job creation includes Made-in-Rwanda initiatives and agro-processing.

“The biggest gains can be seen in some of the Made in Rwanda initiatives such as textiles, agro-processing. The important thing is to focus on agriculture productivity because that is where most people are employed; you want to have more jobs for young people. You also want to secure the income,” she explained in an interview.

There is also likely to be a further reduction of trade deficit due to the emergence of local industries and increased exports capacity.

In 2017, the trade deficit shrank by about 21 per cent from $1624.6m in 2016 to $1271.9m in 2017.

With further recovery of commodity prices in the international market expected this year, Rwanda could see increased earnings from exports such as minerals, tea, coffee, non-traditional exports and re-exports such as oil.

Much is expected from the mining sector which is said to have new products which are lighter, easier to process and have higher returns.

“There are new minerals such as gemstones which are lighter but of higher value. These minerals are going to bring in much more value. This is a development that we are looking at,” Redifer said.

With the sector undergoing reforms targeting attracting major players with large investment potential, the sector is likely to significantly increase exports, create high quality jobs as well as influence growth of other sectors.

The taxman is also set to see increased earnings from the economic activity.

Rwanda Revenue Authority is aiming at collecting about Rwf1.22bn in tax revenues by June this year after surpassing its half-year target for the period between July to December last year by 10 per cent.

The half-year performance for the period between July and December was Rwf 582.7bn compared to first semester of 2016/2017 where they collected Rwf 507.5billion.

With the major tax heads for the performance being Value Added Tax, profit tax and mining royalties which are also in favour by the projection, RRA could go past its target in 2018.

The Minister for Finance and Economic Planning, Claver Gatete, said that Rwanda being an open economy the government is closely monitoring international economic trends.

“With the good rains so far and no drought expected in season B, there is not much risk in this aspect. We are already seeing positive signs such as the recent signing of the African Continental Free Trade Area agreement, which could improve trade,” Gatete said.

Further projections show that the economy could grow by 7.8 in 2019 all factors remaining constant.

editorial@newtimes.co.rw

 

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