Understanding the recent growth numbers

Nineteen years ago, the Rwandan government launched the Vision 2020 development agenda in which it was determined that “to transform the country into a middle-income economy, it would require an annual growth rate of at least 7 per cent.”

That government mission statement played out vividly in my mind as the Ministry of Finance and Economic Planning officials read out the economic update for the period April to June 2019 in which GDP grew by 12.2 per cent.

I looked at the story in the context of a relay runner that increases the pace as the finish line comes into view; the Rwandan economy appears to be pacing up as 2020 gets within reach.

Generally, the economy has enjoyed a good run since 2000, thanks to prudent economic policies; the aspiration to average 7 per cent growth has largely been met, especially in the last fifteen years. But this is a relay run and the new finish line is set to shift to 2050. Can we keep the pace?

Rwanda’s 12.2 per cent GDP growth between April and June is likely to boost investor confidence, especially those interested in the East African bloc, that the economy is well oiled to sustain its fast pace beyond 2020, despite external distractions in the global economy such as China-US trade squabbles. 

Since the first quarter (January to March period) the economy has performed above expert expectations and the double-digit growth in the second quarter is further evidence that Rwandan GDP is minding its own business, literally brushing off external growth distractions in the region and beyond.

Finance minister Uzziel Ndagijimana made mention of that aspect during a press conference to officially announce the performance.

“Rwanda is not immune to the international trade dynamics but considering the weak global economy, the effect on our growth was minor,” he said.

Global growth remains subdued with the IMF’s annual forecast placing it at 3.2 per cent for 2019 and only expects it to slightly pick up to 3.5 per cent in 2020.

Therefore, Rwanda’s double-digit growth against weak expectations is an exception and a good place to come for capitalists seeking to scale or start-up.

The thinking behind banking on Rwanda is that in terms of economic stability, it offers a solid foundation for investors to establish their bases here as they seek ways of tapping into the surrounding markets especially in the wider East African region.

So, in the end, it is not Rwanda’s 12 million-person population to focus on but its economic stability that the country offers, working as an efficient launch-pad into the bigger regional economy.

If the first and second-quarter growth pace is sustained into the third and fourth quarters of the year, chances are that the World Bank’s annual growth forecast that is in the range of 7.5 to 8 per cent, will be surpassed, this, especially if the regional trade relations are normalized.

One can also make mention of the warming bilateral ties between Rwanda and DRC under new President Félix Tshisekedi’s administration, this, likely to yield benefits that will positively impact growth dynamics.

For instance, the improved cooperation is already helping dampen the spirits of hostile armed forces that have been operating in DRC, aiming to destabilize Rwanda and the killing of FDLR commander Sylvestre Mudacumura, early this week, can be seen as an early dividend.

The sustained expansion of RwandAir, flying into more destinations is also serving a strategic benefit to Rwandan traders. For instance, two friends of mine that own clothing stores in downtown Kigali are now flying directly to China and Turkey to find stock, thanks to RwandAir.

RwandAir’s ever-growing routes have literally put the world within convenient reach of many Rwandan traders who were hitherto dependent on regional dealers.

The routes are also an enabler for Rwandan exports to the world especially supporting the success of the Made in Rwanda initiative.

These and many other favourable factors, internal and external should help sustain Rwanda’s fast-paced growth in the ultimate quest for middle-income status achievement.

The views expressed in this article are of the author.

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