RWANDA – In its report dubbed “The Rwanda Economic Update” (REU) that was launched last week, the World Bank forecasted an economic growth rate of 5.7% this year and 6.6% in 2015.
The World Bank’s projection is slightly lower than that of the government and International Monetary Fund’s of 6%.
The report indicates that Rwanda’s growth slowed to 4.7% in 2013, the lowest growth since 2003, due to various factors including delays in budget expenditures. However, in 2014, the expansion of the services sector contributed to a recovery of growth rate to 7.4% in the first quarter.
The report argues that the contraction of domestic demand was offset by positive external demand.
Heavy investment in the mining sector by the government of Rwanda in previous years contributed to the sharp increase in mineral exports, which led to 40% of the total goods exports in 2013.
“The lagged effect of the aid shortfall to the economy was extended to the second half of 2013, decelerating both public and private sector activities.
However, signs of recovery are evident in 2014. In addition to GDP growth rates, turnovers of services and industries have been picking up. Therefore, we are hopeful that the growth in 2014 will be higher than that in 2013,”Toru Nishiuchi, World Bank Economist and co-author of the report, said.
Toru said that going forward Rwanda needs to transform its economy from being public sector led and domestic demand driven to being self-reliant, private sector led, and a net exporter by addressing constraints to private sector investment such as energy and transport.
In this regard, public investment should focus more on how to leverage private sector investment.
According to the report, high levels of public investment and effective use of aid drove growth during the last decade. Although aid inflows resumed in the first half of 2013, their share in the economy is likely to gradually decrease.
The country’s future growth will increasingly depend on progress of domestic resource mobilization and transformation in spurring private sector–led growth.
“Rwanda’s growth rate in the last decade has been impressive. What is needed now is a significant structural transformation of the economy from one that is characterized by a large public sector, by a dominance of the non-tradable sectors and by limited private investment.
This kind of transformation would minimize current vulnerabilities in the economy and enable Rwanda to sustain its high growth rates into the next decade,” said Carolyn Turk, World Bank country manager for Rwanda.
October 7, 2014; http://focus.rw/wp/2014/09/world-bank-projects-5-7-economic-growth/