East African Business Week (Kampala)
Bosco Hitimana
16 August 2008
Kigali — The Rwandan economy in real terms is expected to grow by 8.5% surpassing projected 6.8% despite 13.1% inflation registered in the first half of the year.
Finance and Economic Planning minister, Mr. James Musoni attributes the new single digit figure to the half year results posted by the country's central bank last week, showing impressive economic growth versus high imported inflationary pressure.
The minister said that the expected 8.5% growth of real Growth Domestic Product (GDP) in this year will among others be geared by the expected good performance of the agricultural sector elevating production volumes and keep prices constant to curb down inflation.
The country's growth is also expected to significantly come from the good performing manufacturing industry especially alcoholic and non alcoholic drinks followed by construction (+18%), and service industry especially tourism, transport and financial sector (+13%).
"This strong performance should be put in the context of a challenging international environment," Musoni said in his statement.
The monitory policy and financial stability statement read by the governor of Rwanda National Bank (BNR), Mr. François Kanimba, shows that in the past six months, Rwanda's economy was characterised by the high inflationary pressures (13.1%), mainly due to imported goods.
Governor's statement clearly explains that the change of the overall price index as of end of June 2008 was 13.1% compared to December 2007, against 4.5% in the corresponding period of 2007.
Meanwhile the greater change was incurred in imported goods (15.8%) compared to the locally made products (12.4%).
"The imported inflation is manly attributed to oil prices and food prices particularly cereals, cooking oil, fish and sugar," the statement read in part.
The increase in inflationary pressures was also linked to alcoholic beverages, transport and education.
"It's the first time for several years that imported inflation has been so much significant in Rwanda", governor said in the statement, adding that the very inflation had decreased by 1% in the first half of 2007.
The statement also notes that the agriculture sector improved in the first half of 2008 as a result of increased availability, accessibility and affordability of the fertilisers to farmers.
In some crops like roots and tubers, growth was +50%, while cereals particularly wheat and maize, growth exceeded 175.5% and 62.9%.
In non agriculture sector, services and industry sectors contributed to the overall growth registering 40.95% and 38.93% respectively.
The good performance of the industrial sector is attributed to the increasing construction and public works sector and manufacturing sector which contributed 45.17% and 42.68% respectively.
The growth in the service sector was moved by general trade, importers and distributors of petroleum products, as well as banks and insurance companies which recorded a turnover growth of 38.19%, 53.26% and 45.54% respectively.
Large telecom firms also achieved a growth of 23.94% of their turnover compared to the same period in 2007.
This led to large companies recording a total turnover worth Rwf504.23billion compared to Rwf359.25billion in the same period in 2007.
This marked an increase of 40.36%.
Also in the first half of the year, imports and exports performed better with strong percentage increase compared to the same period in 2007.
The governor's statement shows that imports rose by 56% in value and 4.3% in volume compared to the same period in 2007.
In the same period, exports value grew by 53.5% compared to the same period in 2007, due to good performance of mining, coffee and tea sectors contributing 39.8%, 9.8% and 18.3% respectively.
However, tourism was not mentioned in the governor's statement and according to Rwanda tourism board, tourism ranked the first exporter registering $80million from 408,482 international tourists.
This marked 3.4% increase in total tourists and 22% in revenue collection compared to the same period last year.
Officials are optimistic that given the projections for the next half of the year, Rwandan economy is likely to remain stable with minimal inflation resulting from constant prices.
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