After slumping into a recess in 2020, Rwanda’s economy looks bullish as it recovers past the shocks of the covid-19 pandemic with its GDP growing by 4.4 percent up from 2.3 percent on annual basis by June this year.
Central Bank’s optimism for a continued recovery trend expected to up further next year is driven by the positive outlook of the sectors mainly agriculture and industry as well as vaccine rollout and expected 6.0 percent.
“Going forward, the economy is expected to continue the recovery path supported by vaccine rollout, fiscal stimulus package as well as accommodative monetary policy stance,” said John Rwangombwa, governor, Central Bank.
By large, the growth in agriculture 4.9 percent from 2.1 percent and a high growth performance in industry 8.9 percent from 2.6 percent triggered the recovery and continues to growth on account of the expected rebound in tourism sector that was hit hard by the pandemic.
According to central bank, the growth in agriculture was driven by Food production representing 62.3 percent of the sector’s agriculture value added in the bank’s 2020/21 year after it increased by 4.9 percent against 1.1 percent banking on favorable weather conditions that facilitated good harvest in season A of 2021.
Whilst, the industry sector’s good outlook was driven by manufacturing industries that grew by 11.6 percent from 3.2 percent with construction growing 7.8 percent from 11.4 percent previously which was on account of the increased demand for locally produced goods for infrastructure projects.
The mining sector which faced its moody output slumping by 25.8 percent driven by global economic shut down mainly in China started its recovery growing by 1.5 percent as mineral prices picked on the international market.
Information and communication as well as financial services contributed to the sluggish growth of the services sector which grew by 2.2 percent in 2020/2021 from 1.6 percent the previous year. The sub sectors grew by 24.4 percent from 22.3 percent, financial services 7.8 percent from 0.8 percent respectively. The tourism and education were most hit due to covid-19 containment.
But in the same fiscal year, the country’s trade deficit slightly went up to 44.4 percent up from 39.9 percent in the previous fiscal year 2019/2020 (2,000.4 million in 2020/2021 from USD 1,927.2 million), motivated by a growth in imports of 8.8 percent despite an increase of 16.43 percent in exports.
Therefore, quick policy interventions by the National Bank of Rwanda and other government agencies were crucial to tame the propagation of such a global economic shock on to the Rwandan economy and financial sector in particular.
The bank says the recovery in the fiscal year 2020/21, supported by Government economic recovery plan, easing monetary policy and a gradual lifting of containment measures.
To contain the slumping of the economy which was its worst in the past decade, with businesses bent up to their knees, the central bank set policy measures that were aimed at abjuring the spillovers as the global economy contracted by 3.2 percent in 2020 to its worst since World War II.
The NBR (central bank) maintained an accommodative monetary policy stance by keeping the central bank rate at 4.5 percent throughout the year to further support the financing of the economy. During the financial year under review, the Governor said.
Further, the bank, improved its Extended Lending Facility (ELF), the Treasury bond rediscounting window and keeping the reserve requirement at 4 percent low.
These measures, experts say helped to ensure reliability of liquidity in the economy as well as easing the cost of borrowing for corporates and individuals to further stimulate the economic activities.