Economy registers strong recovery

A strong positive growth of the industry and service sectors in the first three months of 2010 is offering optimism that the real economy will bounce back with a strong Gross Domestic Product (GDP) growth rate in the financial year 2010/11, Central Bank statistics have shown.
Recovery in the banking system has been central to the improved growth in the service sector
Recovery in the banking system has been central to the improved growth in the service sector

A strong positive growth of the industry and service sectors in the first three months of 2010 is offering optimism that the real economy will bounce back with a strong Gross Domestic Product (GDP) growth rate in the financial year 2010/11, Central Bank statistics have shown.

The service and industry sector were significantly affected by the external shocks of global financial crisis and the liquidity crunch last year.

But a mixture of better international economic environment, continuing agriculture sector performances and improvement in the banking system liquidity conditions have ensured recovery in the respective sectors.

According to the Central Bank’s quarterly report, the total turnovers registered by large companies in the industry and service sectors rose by 22.3 percent to Rwf310.65 billions in the first quarter of 2010 from Rwf253.96 billion in the same period last year.

This is expected to boost economic growth prospects for this year to between 7 and 8 percent after declining to 6 percent last year from 11.5 percent in 2008.

“The performance of the economy has greatly improved this year and we expect growth to be much higher than last year. For instance in the Service industry average growth should be higher than 20 percent,” Francois Kanimba, the Central Bank Governor told Business Times recently.

The industry sector slightly rose by 8.1 percent due to the increase in the mining and construction sectors which grew by 23.35 percent and 17.14 percent respectively.

The service sector grew by 28.09 percent on account of high increase of 125.3 percent in the transport and storage services sector while banks and insurance services grew by 44.5percent.

Yet last year industry and services underperformed, growing by only 1.1 percent and 4.3 percent respectively down from 16.3 percent and 11.5 percent in 2008. This was mainly attributed to fall in global demand and tightening banking system conditions.

For this year the service sector is projected to expand by 7.6 percent on account of increased government spending.

Though the other services performed better, garage services, which had been performing better, did poorly this time falling by 66.8 percent from Rwf1.68billions to Rwf0.56 billions in the first quarter of this year.

Regarding the external sector, strong recovery was also seen in the export sector which rose sharply by 11.47 percent and 29.04 percent in value and volume terms respectively. Imports declined by 3.22 percent in value while increasing by 19.66 percent in volume.

As a result the imports/exports coverage ratio improved to 15.05percent this year from 13.07 percent in the first quarter 2009.

Sustained growth of exports is needed to close in the gap with the country’s worsening trade balance primarily driven by declines in export prices during the financial crisis. Last year, imports outstripped exports pushing up the trade deficit by 20 percent.

However the value of exports is expected to go up by 25 percent this year with the steady recovery witnessed in the sector, the Governor said.

Rwanda’s traditional exports such as coffee, tea and minerals continue to dominate the list constituting 61.05 percent of the total export earnings in the first half.

Coffee and tea took the lion’s share of the total export earnings contributing $18.82 millions or 39.24percent while major mineral exports contributed $10.46 millions or 21.81percent respectively.

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