Rwanda’s economy maintained strong growth in the first quarter of this year, the central bank said on Thursday, reflecting sustained recovery from the 2020 Covid-19-induced contraction.

A combination of policy initiatives including massive Covid-19 vaccination that led to a large scale opening of the economy as well as the central bank’s accommodative monetary policy supported the improvement of economic activity, the Bank said.

The Bank’s latest data show that the composite index of economic activities—which also gauges business activity— increased by 13.7 per cent in the first quarter of 2022 from 11.9 per cent in the same quarter of 2021.

This, the financial sector regulator said, suggests a higher GDP growth compared to the 3.5 per cent that was recorded in the first quarter of 2021.

This was disclosed to the media after the quarterly Monetary Policy Committee meeting where the central bank presented its assessment of the economic outlook.

The strong economic performance was driven by services and industry sectors linked to the full reopening of the economy and government initiative that is supporting the manufacturing and other infrastructure projects.

On the basis of trade, the central bank data shows that exports improved by 44.6 per cent, mainly attributed to a combination of commodity prices of traditional products (tea, coffee, and minerals) and an increase in the volume of non-traditional exports that were driven by the recovery in the manufacturing sector.

Imports also rose by 14.2 per cent owing to the rise in international commodity prices and high domestic demand. The bigger increase in export earnings reduced the trade deficit by 2.6 per cent in the first quarter.

However, Governor John Rwangombwa said that while this year’s economic growth will remain strong but it will be lower than the earlier projection of 7.2 per cent.

This is mainly due to the recent spike in consumer prices partly linked to negative effects of the Russia-Ukraine war but also the unfavourable weather conditions that greatly affected the production of the agriculture season A, he said.

The report indicates that fresh food prices rose to 4.1 per cent in Q1 of 2022, from a deflation of 8.6 per cent in 2021, as a result of low supply of fresh food due to low agricultural productivity and over the same period, energy inflation increased to 10.8 per cent from 3.4 per cent, mainly driven by charcoal inflation because of the heavy rains witnessed over the past months.

Rwangombwa said that the overall projection of the year shows that inflation is expected to be at 9.2 per cent, above NBR’s upper bound of 8 per cent.

The central bank, however, predicts that the prices of goods and services will ease by mid next year with inflation decelerating to an annual average of 7.6 per cent.

The bank also maintained its key rate at 5 per cent as part of the measures to keep commodity prices under check.