Rwanda’s gross domestic product (GDP) per capita could reach $2,817 (about Rwf2m) by 2050, according to the Rwanda Economic Update report by World Bank released last week.
The projected rise in GDP per capita from the current $600 could be a result of the current drop in fertility rate that stands at 4.6 children per woman. This is a decline from 6.1 children per woman in 2004, according to the report.
However, the country is still among those with the highest fertility rates in sub-Saharan Africa despite the strong measures in place to reduce the rate further.
According to economists, the development will greatly impact on the economy over the coming decade.
Tom Bunddervoet, World Bank’s leading research economist on demographic divide, noted that Rwanda’s labour force will increase from 53 per cent to 64 per cent and then peak at 67 per cent by 2050.
“This will reduce the dependency ratio from 0.84 per cent to 0.45 and 0.37, respectively, increasing economic output,” Bunddervoet said during the launch of the report in Kigali recently.
The country’s labour force is tipped to triple from 5.7 million to 15, and then 16 million over the same period, Bunddervoet added.
This could, apart from drastically reducing dependency levels, increase household resources, meaning minimal fiscal burden, according to the report.
Good news for economy
Marc Pecsteen, the Belgian ambassador to Rwanda, said the increased labour force will foster economic growth.
“The government is targeting to achieve 11.5 per cent growth, therefore having more people working will boost the economy and lead to the realisation of the objectives of the second phase of Economic Development and Poverty Reduction Strategies through increased investments and GPD per capita.”
Experts also say for an economy looking to grow 11.5 per cent per annum for the next four years, it’s imperative that the population pressure is contained to reduce government expenditure and create room for more production-oriented investment.
Necessary economic evil
Mohamed Mazimpaka, the director of Chamber of Commerce at the Private Sector Federation, pointed out that a big population only becomes a threat to the economy when a huge percentage of it is not productive.
“However, if it is productive, and you have increased domestic demand for goods and services, this will ultimately mean increased production which is good for any economy,” Mazimpaka argued.
Annette Karabwa from Rwanda civil society said there is need to put into account the impact of a vibrant economy could have on natural resources, climate and land as factor of production.
“A vibrant economy could lead to increased demand of goods and services, adding extra pressure on factor inputs such as land and climate. This could be disastrous given the fact that some of the resources are inelastic,” she noted.
Karabwa called for the involvement of civil society in creating productive solutions that will help address the imminent challenges that might result.
According to analysts, a tripling labour force will mean increased demand of productive employment opportunities; this could drag economic dividends if more jobs are not created.
“We could see widespread underemployment of human resources and wasting of unique demographic opportunity,” Dr. Emmanuel Hafashimana, the head of economics department at the University of Rwanda, said.
However, according to Bunddervoet, fostering skilled and productive workforce, further investments in health and education systems, as well as creating flexible labour markets and a more friendly business environment and fast-tracking regional integration could be play a big role in counter-balancing the low side.
Uzziel Ndagijimana, the Ministry of Health permanent secretary, noted that the country is already enjoying fruits of the reduction in fertility rate.
“We are seeing increased education levels, improved household incomes and generally improved standards of living because people are now producing a manageable number of children.
Kampeta Sayinzoga, the Ministry of Finance permanent secretary, said the challenge of demographic demand is how to consistently supply contraceptives and ensure that they are effectively used.
“There is a need to actually measure the actual productive outcomes resulting from the decline in fertility rate, which I believe should be followed by more additional reforms, if we must get there.”
A new report on Africa’s youth unemployment from World Bank that was released recently warned that unless economies create jobs for the youth, economic sustainability could still be a problem for the continent.
Statistics indicate that increased female education was responsible for a reduction of 23 per cent in the fertility rate between 2005 and 2010, while increased household living standards contributed 15 per cent, with higher women participation in labour market force accounting for 5 per cent, according to the report.