Economy to grow by 8.8%, central bank

Central bank is projecting the economy to grow by 8.8 per cent from 7 per cent as earlier projected at the beginning of this year, driven by increased credit to the economy.According to the central bank Governor, Claver Gatete, the industry sector expanded by 15.1 per cent from January to August this year as the service sector grew by 8.5 per cent and agriculture by 8.2 per cent.
Central bank Governor Claver Gatete and deputy Governor, Monique Nsanzabaganwa during last week’s press conference when the bank announced it had raised its repo rate. The New Times / File Photo
Central bank Governor Claver Gatete and deputy Governor, Monique Nsanzabaganwa during last week’s press conference when the bank announced it had raised its repo rate. The New Times / File Photo

Central bank is projecting the economy to grow by 8.8 per cent from 7 per cent as earlier projected at the beginning of this year, driven by increased credit to the economy.

According to the central bank Governor, Claver Gatete, the industry sector expanded by 15.1 per cent from January to August this year as the service sector grew by 8.5 per cent and agriculture by 8.2 per cent.

The harvests for 2011 seasons A and B performed better at 10.4 per cent compared to 9.5 per cent harvest recorded last year, due to favourable weather conditions, crop intensification programme, he added.

Central bank figures also indicate that the performance in non agricultural economic activities is also evidenced by significant increase in the total turnovers registered by large companies in the industry and service sectors which increased by 23.9 per cent during the first eight months of 2011 compared to the corresponding period in the previous year.

The Managing Director of Rwanda Commercial Bank (BCR), Sanjeev Anand, said his company recorded 30 per cent increase of loans approved as of August since last year and expecting to grow between 5 and 10 per cent by the end of this year.

Last week, the central bank increased the key repo rate by 0.5 per cent to 6.5 per cent in order to control inflation.  Experts said the decision could lead to higher borrowing costs. 

Anand said the change in central bank’s rate at which it lends to commercial banks will not affect BCR because there is enough liquidity to lend to the public.

“We have a diversified loan portfolio but our main focus of recent has been in Small and Medium Enterprise and retail business,” Sanjeev said.

Lawson Naibo, Chief operations Officer of Bank of Kigali (BK) said their gross loan book grew by 23.5 per cent as of August 2011.

“Our loan book tends to reflect the structure of the economy so the services industry, commerce, hotels and restaurants accounts for approximately 55 per cent of our corporate loan book followed by construction at 27.5 per cent and manufacturing at 7.5per cent.”

He added that BK may not be affected by the increase of KRR as it has to deploy the monies – Rwf20 billion- that was raised in the recent IPO and the US$20 million credit line signed in May 2011 with the French development Agency.

“This scenario might force some banks to increase their lending rates or curtail lending to the private sector,” he said.

He however, observed that given the increase, it is possible for some conservative banks to reduce their lending to the private sector in favour of government securities. Deposit providers might also raise their interest requirements.

According to Central bank’s Composite Indicator of Economic Activities (CIEA), non-agricultural activities performed well, which increased in nominal terms by 11.8 per cent in August this year compared to 10.8 per cent recorded in the same period of 2010.

Official figures indicate that turnovers for the industry increased by 26.6 percent while total turnovers for services increased by 22.6 percent.

Ends

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