Rwanda’s economy defies global crisis to post impressive results
The global economy has actually not yet recovered from recession which means economic activity and international trade is low. Investors are reluctant to invest in new projects and countries can’t earn much from their exports as demand on the intentional market is weak.
The IMF continues to revise its World Economic growth forecasts downwards and currently stands at 3.5% from 3.9% in 2011. Though growth for the first quarter of the year surprised with 3.6%, serious economic tensions continue to bog down global commerce with and European banking woes hurting investor confidence even more.
The USA’s economy that grew by 2.0% in first quarter only managed slightly more than 1.5% in the second quarter; Japan grew by 1.6% from 4.7% in the first quarter while the Euro-zone only managed growth of 0.5% in the second quarter. The UK is in recess with the country only growing at 0.8%.
Europe, Asia and of course the US are the leading buyers of Rwanda’s traditional exports and their woes would naturally slow us down but that has not been the case.
For starters, the economy grew by 7.7% precisely what was projected for the fiscal year-that can only mean that whatever system we are using, it’s working.
According to Claver Gatete, the Central Bank Governor, BNR recorded an 11.1% increase in the composite index for non-agriculture economic activity (CIEA)
The CIEA simply means all economic activities in the country that don’t relate to agriculture.
Gatete says the country’s industry and service sectors registered growth of their turnovers with 21.7% and 24.4% respectively. Industry and service sector are the leading source of jobs and therefore key to the health of an economy.
As expected, the value of most of Rwanda’s exports reduced this generally to weak global demand. The value of tea exports fell by 7.7% as well as volumes which reduced by 10.7%. Minerals also took in the blow registering a 4.5% reduction in value and 0.5% in volume.
However, Rwanda’s fortunes were saved by growth in both value and volume of coffee exports at 48% and 51.8% respectively leading to the overall exports’ value growth of 25.1% contributed by the growth in volume of 61.9%. Other exports grew by 64.6% in value and 63.4 % in volume salvaging Rwanda’s fortunes in the process.
Inflation levels have further gone down to in the neighborhood of 5%, the banking industry, which is the pulse of the country’s financial sector has too completed the first half of 2012 on a high with their balance sheet increasing by 21.9%, Capital Adequacy Ratio (CAR) increased by 25.5% way above BNR’s target of 15%.
Micro-Finances too did well realizing an asset growth of 22.2% and total deposits and loans amounted to RWF 30.2 billion and RWF10 billion respectively.
Concerning inflation, Rwanda has delighted in the news that inflation levels have generally reduced in EA partner states with Kenya hitting single digits, Uganda and Tanzania also showing progress. Rwanda’s own inflation levels were measured at 5.9%.
Gatete attributes the regional success in containing inflation levels to better agriculture production and tight monetary and fiscal policies that have seen inflation steadily drop since November 2011 after peaking.
With falling oil prices falling, the current inflation is projected to fall further.