East Africa: Rwanda Services Sector Boosts GDP

Rwanda, Kigali — The National Institute of Statistics last week announced that the services sector is now doing well, a sign the economy of Rwanda is recovering from last year's global financial crisis.

During the recession, financial institutions almost stopped lending, receipts from exports reduced, donors scaled down funding some of the projects and investments were postponed. As a result the GDP was affected slowing down economic development.

However, natioanl accounts of Rwanda contained in Fiscal year estimates 2009/2010 show the service sector has regained its leading position in contributing to GDP, posting 46.2%, relegating agriculture to second position as of June this year, Diane Ngendo Karusisi, Director General, Rwanda National Institute of Statistics, announced at a press briefing in Kigali last week.

She was releasing Rwanda's national accounts for fiscal year 2009/2010. Karusisi revealed that Rwanda's GDP has grown to Rwf3,160b (US$5,374,149) up from Rwf2,843b ($4,835,034) in the year ending June 2009.

This GDP estimates was calculated at constant 2006 prices. The statistics shows that in 2009/10 the GDP was 6.2 % higher in real terms than it was in 2008/09. She gave reasons why the service sector is performing well. "Banks are doing well. Loans are picking up. Government is spending more in education and health."

In the service sectors, the research team from the National Institute of Statistics found the whole sale and retail, trade, hotels and restaurants businesses booming. Others businesses that are doing well include transport, storage, communication finance insurance real estate, business services public administration education health and personnel services.

With the service sector registering progress, agriculture has been relegated to the second leading contributor to the national GDP, posting Rwf1,065 billion, (1,811,224), a 33.7%.

"The growth of the main three sectors in this fiscal year was 5.9% for agriculture (mainly driven by a 7% increase in the food crop production), 0.6% industry and 7.6% for services, which was pushed by public administration that grew by 10%, and business which grew by 13%," explained Karusisi. She, however, said, the industry sector was not competitive contributing only 1% growth..

"This is mainly due to less activity in the construction sector this year." By June Rwanda population was estimated at 10.2 million people. GDP per head was therefore Rwf307, 941 or $541 at the nominal exchange rate of Rwf569 per one US dollar.

"This is less than the targeted $900 dollars by 2020," said Karusisi. The statistics shows with expenditure on GDP at 2006 constant prices, government consumption grew by 7% and the private sector by 12. The Gross Capital Formation in real terms fell by 7% after two years of exceptional increases which was at 24 and 28%.

Karusisi attributed this to the slow down in the construction sector which was caused by the economic and banking crises. "These crises led to fewer loans given by banks to the construction sector hence decreasing construction activities in the country," she said.

The estimates also suggest the formal sector share of GDP (including taxes) in this fiscal year, slipped back to 22% while the monetary informal and non monetary share remained at 47% and 20% respectively.

The slip back was mainly due to the small number of companies that register for the VAT tax and due to the fact that the biggest part of the GDP is informal, meaning agriculture based.

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