International Monetary Fund (IMF) has projected that Rwanda’s economy will grow by 6.2 per cent in 2017, recovering from a slight dip in 2016 where it grew by 5.9 per cent.
In their second review of Rwanda’s Policy Support Instrument, the IMF projected that the economic growth would be accelerated this year largely by recovery of the agricultural sector, growth in exports, and reduction in the trade deficit.
The Fund anticipates that the government’s efforts and incentives to promote domestic production and consumption of local products as well as value addition of exports will keep the economy buoyant.
IMF Mission chief Laura Redifer said economic growth is expected to recover this year due to good rains experienced so far and expanding domestic production.
The IMF team said the external trade deficit was lower than earlier anticipated in 2016 largely due to a strong pick up in goods and services exports combined with reduced demand of imports.
According to statistics released by the central bank in January, Rwanda’s trade deficit reduced from $1,602.21 million to $1,519.97 million in the first 11 months of 2016.
“The Government also implemented a Made-in-Rwanda policy to encourage domestic production of certain goods currently imported and promote exports diversification intended to foster external stability and growth in the medium term,” Redifer said.
The weather conditions also give the IMF reasons to believe that inflation which is largely food driven will come down as food supply constraints recede.
The IMF team, in collaboration with the Government, yesterday held a seminar in Kigali to discuss Rwanda’s and the region’s outlook.
Reacting to the predictions by the IMF, central bank governor John Rwangombwa said the Government was optimistic on the outlook of the economy this year.
Rwangombwa said there was lesser global uncertainties this year compared to last year and the climatic conditions had so far been favourable.
The outlook and results this far, he said make a case for deeper integration across the East African Community, which he said was part of the contributing factors to the positive outlook.
Despite inflationary pressures starting off higher than expected in 2017, he said that they were expected to come down during the year to about 6-7 per cent by the end of the year.
On the army worm crisis that many fear it could affect the performance of the agriculture sector and consequently the economy, the governor assured that it would not hold back the economic performance as it had been tamed early.
It is estimated that the pests have ravaged about 16 per cent of the total maize plantation but Rwangombwa said that would still not have much of an impact to hold back the sector.
Finance and Economic Planning minister Claver Gatete said that the performance so far had been an important lesson on value addition of exports as well as diversification of exports.
The IMF projections come a few days after Fitch Ratings, a global leader in credit ratings and research, affirmed Rwanda’s economic outlook as stable.
The report, noted that there was low public debt and high growth potential even as the depressed commodity prices in 2016 had increased the balance of payments pressures for Rwanda.