What drove Rwanda’s economic growth in 2019?

An aerial view of the Kigali Special Economic Zone in Gasabo District. As the IMF and WB call for a global sense of relief for developing countries and strong signal to financial markets, Rwanda has announced Rwf50 billion to stimulate private sector lending. / Photo: File.

Rwanda’s economy grew by 9.5 per cent in 2019 to Rwf9,105 billion from Rwf8,354 billion, according to the latest figures from the National Institute of Statistics of Rwanda (NISR).

The Gross Domestic Product (GDP) – the measure of economic growth – was driven by traditional sectors –industry, services and agriculture.

Agriculture contributed 24 per cent, industry 18 per cent and services contributed 49 per cent, while 9 per cent was attributed to net tax on products.

All sectors registered growth.

 Agriculture grew by 5 per cent, industry 17 per cent, and services rose by 8 per cent.

There are, however, specific sub sectors that contributed significantly to economic growth last year.

C&H Garments employees at work at the Kigali Special Economic Zone in Gasabo District. Industry was one of the main drivers of growth in 2019. Photo: File.

These include construction, wood and paper products, as well as rubber and plastics.

Construction was the top contributor having expanded by 33 per cent driven by government projects and some private sector-led activities.

Wood and paper as well as printing grew by 27 per cent, just like chemicals, rubber and plastic products.

Metal products, machinery and equipment grew 20 per cent.

According to Jean Claude Mwizerwa, NISR’s Director of Economics, there were a lot of infrastructure projects in the first half of 2019, which includes roads, Kigali Arena and other residential buildings.

“This pushed up the demand of construction materials such as cement, metal, paints and plastics for construction which again contribute to manufacturing increase,” he noted.

“Furthermore in manufacturing, things like cleaning materials (paper or tissues and soap) are being produced locally to reduce imports,” he added.

The transport sector, which grew 12 per cent and wholesale and retail which expanded by 16 per cent, among others, contributed significantly to the growth in services.

“Transport services are being improved in general especially public transport, plus air transport which keeps expanding,” the Director noted.

COVID-19 impact

Some economists expect consumer spending to be depressed by an inability to go shopping, restaurants, and other public places, while employment and personal income will be hit by reduced hiring and layoffs from containment efforts.

Teddy Kaberuka, an economist based in Kigali, said COVID-19 has created a crisis which has affected many economic activities “starting with the production side: People are no longer productive, especially in the first quarter of this year because they are grounded at home.”

“We can’t expect the same growth in 2020,” he noted, adding that this is because aviation, hospitality and tourism, among other important activities, have been brought to halt.

Restaurant and hotels are already laying off employees, while workers in the conference tourism have already lost their jobs as a result of postponement and cancellation of conferences and events.

Rwanda was supposed to host some 20 conferences in March, with hopes to generate $80 million. The conferences were suspended in the wake coronavirus outbreak.

The government’s stimulus response is believed to be key, as the pandemic creates a supply and demand shock.

Kaberuka highlighted that government should facilitate enterprises to retrieve their production levels through tax incentives, especially small businesses.

“Top priority should be helping small business owners to come back to their businesses, help financial sector to service their clients, but also those who were not able to pay their loans as a result of the pandemic,” he noted.

The government recently announced a Rwf50 billion package for local banks to address the impact of Covid-19 and measures to help support funding for business continuity.

editor@newtimesrwanda.com

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