The Government is counting on the tourism industry and strong monetary and exchange rate policies to keep the economy stable in light of global economic turbulences expected in 2016.

The economy performed well in the first 3 quarters of 2015, with GDP growing at an average of 6.9 per cent slightly lower than 7.2 per cent recorded in the same period in 2014, according to the National Bank of Rwanda (BNR).

In 2015, growth in real GDP was largely driven by the good performance of the service sector at 7.3 per cent, industry 7 per cent and agriculture sector at 5 per cent.

The positive performance, according to central bank Governor John Rwangombwa, was largely supported by the accommodative monetary policy implemented by the bank to support financing the economy by the financial sector.

Governor Rwangombwa, was presenting the central bank’s monetary policy and financial stability statement in Kigali, yesterday.

This BNR initiative seemed to have paid off with the overall composite index of economic activities (CIEA) increasing in real terms by 14.6 per cent in the last quarter of 2015 from just 11 percent in the 3rd quarter and 14 percent the same period in 2014.

For example, new authorised loans by the banking sector to the private sector rose by 13.7 per cent in 2015 amounting to Rwf742.2 billion from Rwf653 billion the previous year same period.

Economy to grow by 6.3 percent

Meanwhile, the central bank projected the country’s economy to grow at 6.3 per cent down from 7 per cent growth projected in 2015.

According to Rwangombwa, the agriculture sector is projected to grow at only 5.1 percent down from 5.5 per cent in 2015 and industry at only 6.2 per cent from 8.7 perc ent in 2015.

This, therefore, means that the country is looking to the service sector that is projected to maintain a stable growth rate of 7.1 percent throughout the year to preserve economic stability.

Worry of global economic shocks

He added that despite the positive outlook, downside risks remain and are likely to increase the country’s economic vulnerability.

For example, the continued strengthening of the dollar and decline in exports earnings in Rwanda emanating from global market conditions may continue to exert pressure on the national currency exchange rate but also pose some challenges to the current central bank’s accommodative monetary policy, Rwangombwa, said.

Globally, economic growth remained sluggish in 2015 with real GDP growing by only 3.1 per cent lower than 3.5 per cent projected in July last year.

Poor performance by the export sector

It is also worth mentioning that despite the increase in the country’s export volumes, both exports and imports registered a decline in value as a result of a fall in international commodity prices.

Overall, the country’s total exports performed poorly, decreasing by 6.8 per cent in value to $558.8 million from $599.8 million.

This poor performance was largely attributed to the decline in performance recorded in the mining sector of 42.1 per cent.

The situation in the mining industry was worsened by the decline in prices of major mineral exports but also a drop in agriculture commodity prices (13.1 per cent) in global market.

However, the decline in export value (6.8 per cent), according to central bank was offset by the 2.8 per cent decline in imports value which led to a drop in the country’s trade deficit of almost 14 percent (from Rwf1, 787.2 billion in 2014 to Rwf1761.3 billion in 2015).

Meanwhile, formal exports registered an increase in volume of 20.5 per cent largely dominated by re-exports at 50.5 percent, coffee exports at 17.7 per cent and tea export revenues which increased by 8.9 per cent.

Counting on tourism to balance trade

Although the global economy is projected to grow by 3.4 percent this year, government wants to leave no stone unturned.

To balance its trade books, government is counting on its service sector in particular the tourism industry to rake in more forex revenues.

For example, the tourism sector alone is expected to earn the country more than $400million which justifies the enormous resources channeled to support new conferences and events (MICE) by the Rwanda Development Board (RDB).

Francis Gatare, RDB’s chief executive officer, is confident, leveraging on tourism and strong monetary policies will keep the country’s economy competitive despite global economic shocks.

The MICE strategy seeks to attract all the major international conferences and workshops to Rwanda and support the private sector to invest more into the hospitality industry.

"We have established a strong event management market team, introduced the new cost benefit analysis model to strengthen the MICE strategy; we are therefore, confident that our tourism sector will play a critical role in ensuring economic stability,” Gatare said.

The tourism sector fetched more than $350 million to the national reserves.

Rwanda will in May host the World Economic Forum and African Union summit later this year.

The two events combined are expected to attract more than 6000 delegates which could translate into more forex revenues.

Boosting consumption of locally produced products

Meanwhile, Francois Kanimba, Minister for Trade and Industry, called on stakeholders to establish mechanisms and strategies that will help enhance consumption of locally manufactured products to reduce expenditure on imports.

This way, the country will be able to correct its trade deficit and reduce its import bills thus keep the economy stable against any external shocks.

Maintaining economic stability

To remain stable and competitive, the central bank is pledging to implement a more prudent monetary policy with the intent of maintaining a low and stable inflation but also continue supporting the economic financing by the banking industry while limiting pressures on the Rwandan currency.

"In addition the central bank will follow up the consideration of SACCOSs at district level and their computerisation process and close supervision of the entire financial sector to ensure efficiency, stability and profitability,” Rwangombwa noted.

He added that the central bank will continue the legal reforms to ensure prudential dynamism, ensure consumer protection while ensuring total compliance with the international standards.

Inflation

Generally, inflation in Rwanda continues to record moderate and low levels though it has been increasing since January, from 1.4 per cent to 4.5 per cent in December 2015.

On average, headline inflation increased from 1.8 per cent in 2014 to 2.5 per cent in 2015, mainly driven by rising food prices, especially influenced by vegetables’ prices. Downward pressures came from transport prices following the trend in international oil prices.

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