As the global economic crisis continues to have severe consequences on Africa’s growth, Rwanda proves to be more resilient to exogenic shocks than her African counterparts, a European Commission official has said.
According to David McRae, Head of Delegation European Commission, not all African countries are affected in the same extent but in this respect Rwanda may be among the more fortunate ones.
“In fact the African Economic Outlook (AEO) places Rwanda on top of the list of countries that are providing resilience against the crisis so far,” he said at the launch of the 2008/2009 AEO at Kigali Serena hotel on Tuesday.
McRae said that this is measured by the country’s continued high Gross Domestic Product (GDP) growth estimates.
Last year Rwanda registered a GDP growth of 11.2 percent but government says this year’s growth will drop to 5.7 percent.
The annual AEO is published jointly by the African Development Bank (AfDB), the Organisation for Economic Co-operation and Development (OECD) and the United Nations Economic Commission for Africa, with support from the European Commission.
This year’s AEO, which was launched on Tuesday at Kigali Serana hotel, shows that Africa can only expect 2.8 percent of real growth this year following half a decade of above five percent growth.
The projections are less than half of the 5.7 percent that had been expected before the global economic recession.
Towards the end of last year, the African Development Bank projected that Rwanda’s growth would reach 6.6 percent in 2009 but the projections have been revised downwards to five percent.
The AEO that covers 47 African countries, up from 35 last year forecasts that Africa’s economic growth will rebound to 4.5 percent in 2010.
The collapse of commodity prices and plummeting demand from OECD countries will have an adverse effect on Africa’s budget balances, with the regional budget deficit for 2009 predicted to be around 5.5 per cent of GDP compared to a surplus of 3.4 predicted in the AEO one year ago.
Alex M. Mubiru, Principle Research Economist at AfDB said that African countries need the full support of development partners to continue investing in infrastructure and structural reforms through the crisis.
“An important risk for many of LDCs is the potential impact of that the crisis may have on aid budgets in future years,” he said.
“This is a source of significant fragility for countries heavily dependent on aid, such as Burundi, Mozambique …where most of the budget is financed by aid,” he added.
The report says that economic crisis has eroded benefits accumulated over the years of reform. With a projected growth rate of only 2.8 percent, the AEO says that many people will fall back into poverty.
However, it notes that that Africa is better positioned to weather the crisis than it was ten years ago because many countries have undergone prudent macroeconomic reforms in the past few years.
This has strengthened fiscal balances and reduced inflation to single-digit levels. Many African countries have also benefited from substantial debt relief, with the result that debt service/export ratios are low in most countries.
The 2009 AEO, which has a special focus on innovations in Information and Communication Technologies (ICTs), says that despite low penetration rates for new technologies, innovative applications of ICT have been proliferating to areas such as e-banking, e-payments, e-agriculture, e-trade, e-government and e-education.