The turbulent global economic times and weakening sub-Saharan economies have had little impact on Rwanda’s continued improvement in global competitiveness, a new report shows.
The Global Competitiveness report 2016/17, published by the World Economic Forum (WEF), on Tuesday, shows that Rwanda improved six positions to rank 52nd out of 138 countries globally. The country also remains third in Africa after Mauritius and South Africa.
Regionally, Rwanda maintained its position as East Africa’s most competitive economy despite the outlook painting a rather grim picture with Kenya in 96th position and Uganda in 113th. Tanzania was ranked 116th and Burundi 135th
The report’s authors said the tough times seem to have taken a toll on a majority of economies in sub-Saharan Africa, consequently weakening their competitiveness.
“Sub-Saharan Africa’s competitiveness has slightly weakened year-on-year mainly because of deteriorating macroeconomic environments. Public finance is under stress of economic slowdowns among trading partners and persistent low commodity prices, which affect commodity-exporting countries,” the report says.
The stress factors in the sub-Saharan Africa region are largely due to the fall in commodity prices affecting trade competitiveness, and the normalisation of the Dollar against sub-Saharan currencies.
These factors have also been linked to the slowdown in economic growth that has dropped from over 5.0 per cent in 2014 to 3.5 per cent in 2015 and is projected to fall to 3.0 per cent this year.
The report ranks countries based on national institutions, policies, and factors that determine the level of productivity of an economy, which, in turn, determines the level of prosperity of a country.
Rwanda’s improvement was due to strong and efficient institutions, labour market efficiency, improvements in education and infrastructure, the report said.
In quality of institutions, Rwanda fared well in indicators such as public trust in government, government’s ability to curb wasteful spending, transparency, reliability of police services and property rights.
Across macro-economic indicators, Rwanda fared well because of its ability to contain inflation. The country also fared well in ability to attract and retain talents and skills as well as impacts on tax incentives in the market efficiency indicators.
Areas for improvement
Among the indicators that held back Rwanda’s overall performance was exports’ contribution to gross domestic product where the country ranked 129th globally, as well as foreign market size featuring at 130th position.
While presenting the outcome of the quarterly Monetary Policy Committee and the Financial Stability Committee this week, central bank governor John Rwangombwa cited the widening trade deficit due to the mismatch between import bills and exports receipts.
In the first eight months of the year, the trade deficit rose by 2.2 per cent.
The country seeks to fix this by working with the private sector to improve the manufacturing and local tax base, thus reducing imports.
The report also showed a need for improvement in higher education and training especially in specialised training services to meet the demands in the market.
Richard Samans, head of Centre for Global Agenda and a member of the Board of World Economic Forum, said countries can improve competitiveness by leveraging technology and innovation in the Fourth Industrial Revolution.
“Against this backdrop of seeming contradictions, the Fourth Industrial Revolution brings both unprecedented opportunity and an accelerated speed of change. Creating the conditions necessary to reignite growth could not be more urgent,” Samans said.
This would require that nations ensure sound institutions as well as other indicators such as infrastructure, health, and education.
“Incentivising innovation is especially important for finding new growth engines, but laying the foundations for long-term, sustainable growth requires working on all factors and institutions identified in the Global Competitiveness Index,” he added.
“Leveraging the opportunities of the Fourth Industrial Revolution will require not only businesses willing and able to innovate, but also sound institutions, both public and private; basic infrastructure, health, and education; macroeconomic stability; and well-functioning labour, financial, and human capital markets.”
The Global Competitiveness Report is seen to spur constructive policy dialogue among policy-makers, business leaders and members of the civil society.