World Bank revises Rwanda’s economic growth projection to 7 per cent

World Bank revises Rwanda’s economic growth projection to 7 per cent

The World Bank Group projects that the economy will grow by 7 per cent riding on exports, agriculture sector and narrowing trade imbalance.

The group has previously projected economic growth in 2018 would be at 6.2 per cent.

The projections were announced during the latest World Bank Economic Update released Wednesday.

Presenting their analysis of the economy, an economist at the organization, Aghassi Mkrtchyan said that the revision was informed by the improved momentum in exports and agriculture.

He noted that exports in 2017 had positive trends and were expanding beyond traditional exports such as coffee and tea.

“We have seen the exports of goods now surpassing $1 billion mark which is quite an impressive trend,” he said.

The exports have also been buoyed by improving prices of commodities in the international market which is further expected to improve this year.

“Rwanda experienced a major external adjustment in 2017. There were a mix of factors among them prudent demand management, c ompetitive exchange rate,  higher prices for commodity exports and continued expansion of non-traditional exports. This helped reduce the current account deficit from more than 15 per cent in 2016 to about 7 per cent in 2017” the update’s summary read in part.

This has also created a more competitive exchange rate which is supporting performance of non-traditional exports which enabled improvement of receipts.

“The government’s renewed commitment to scaling up investments in agriculture will enhance the sector’s medium term outlook,” Mkrtchyan said.

The stability of inflation rates this year has also added to the confidence of improved performance this year.

The prevailing risks to the projected growth include poor weather that could affect agriculture which is largely rain-fed.

External risks, the economist say include reversal of current global recovery which could reduce prices of Rwanda’s exports in the international market.

“In addition, the private sector’s unenthusiastic response to the improved investment climate is a major threat to growth sustainability. The recent growth slowdown has exposed limitations of the public investment led model and the importance of the private sector,” the World Bank observed.

The economy in 2017 grew by 6.1 per cent surpassing earlier projections of 5.2 per cent.

The International Monetary Fund had in March this year projected that the economy would grow by 7.2 per cent in 2018 riding on the services sector, agriculture and a rebound in construction activities.