Rwanda’s economy is projected to grow by 6.8 per cent for this year, but it will rebound in 2017 to expand 7.2 per cent. 

In July last year, the Bank had predicted that Rwanda would grow by 7.6 per cent in 2016, which they have since revised downwards.

According to the Rwanda Economic Update, released by the World Bank (WB) yesterday, the growth will be affected by the slowdown of the Chinese and European economies, and decline in international commodity prices, particularly oil and minerals.

The report also noted that the country faced domestic risks, including delayed execution of the budget and inadequate financing for development and infrastructure projects.

The Rwanda Economic Update reports on, and synthesises recent economic developments and places them in a medium-term, regional, and global context and analyses their impact on Rwanda’s economy.

This issue that is on the theme, "Rwanda at Work,” indicates that Rwanda maintained steady growth in the first three quarters of 2015 despite external threats, the slowdown of the Chinese and European economies. 

For example, Gross Domestic Product (GDP) growth remained steady at 6.9 per cent during the first three quarters of 2015, which it credits to macroeconomic stability and low inflationary pressures which were kept at an average rate of 2.5 per cent.

A deteriorating external environment has led the World Bank to revise down its global and regional growth forecasts for 2016. 

The growth forecast for sub-Saharan Africa was 3.4 per cent in 2015, down from 4.6 per cent in 2014, mainly due to the region’s reliance on fuel, minerals and metals, and agriculture commodities.

Domestic issues

However, on the domestic front, risks are on the horizon, including delayed execution of the budget and inadequate financing for development. 

These external and domestic risks affected the performance of the economy, and influenced WB to downgrade growth estimates to 6.8 per cent in 2016 and 7.2 per cent next year.

The World Bank has now put growth for 2015 at 7.1 per cent as they await figures from the National Institute of Statistics of Rwanda (NISR) for the 4th quarter due next month.

Despite the downgrade, Yoichiro Ishihara, the World Bank senior economist, said the growth projections remain impressive and higher than the growth forecast for most sub-Saharan Africa, which was established at 3.4 per cent in 2015, down from 4.6 per cent in 2014.

Ishihara said macroeconomic stability and policy flexibility, together with positive regional economic outlook, buttressed Rwanda’s economy to stay stable.

"Despite the positive economic outlook, risks have been increasing, both externally and domestically, and they include the slowdown of the Chinese and European economies and its impact on Rwanda’s main trading partners, slow budget execution, and inadequate financing for development,” said Ishihara.

More so, the worsening external balance and concern on financing, high and sticky lending rates remain a big challenge for the economy.

This coupled with a decline in prices of Rwanda’s traditional export commodities, high correlation with oil prices and reliance on foreign aid could slow down economic growth rate.

Prof. Thomas Kigabo, the central bank chief economist, also noted that shocks from the global arena could pose a challenge to the economy.

"We managed the economy last year in a very challenging environment; we therefore must think on how to finance growth in 2016,” Kigabo said.

He advised both public and private sector to invest in capital markets as the best alternative to finance the economy and protect it from global economic shocks.

editorial@newtimes.co.rw