Despite uncertainties in the domestic, regional and global environment, Rwanda's economy has remained resilient, with marked economic growth and moderate inflation, Central Bank Governor Claver Gatete has said.
The country's economy grew by 7.5 per cent in the first quarter of 2012, 9.9 per cent and 7.3 per cent in second quarter and third quarters, respectively. This was in line with the country's initial projection of 7.7 per cent for the year, Gatete said.
Inflation declined significantly to 3.9 per cent as of December 2012 compared to 8.3 per cent the same period in 2011.
"This was due to sustained improvement in economic performance, efficient and well co-ordinated monetary and fiscal policies, progressively easing inflationary pressures in the East African Community countries and the stability of international oil prices," Gatete said.
Why GDP rose
He attributed the high gross domestic product (GDP) growth to good performance in the services and industry sectors, which recorded an average of 13.7 per cent and 5.8 per cent growth rate in the first three quarters of 2012.
The central bank chief said the construction, transport and communication, finance and insurance sectors were among the key activities over the period and have sustained the impressive performance.
However, the agriculture sector experienced dim fortunes, registering moderate production last year compared to other sectors as output rose marginally by an average of 3 per cent during the period under review.
"The increment in this sector was low due to unfavourable weather conditions prevailing in the last quarter of 2011 and first half of 2012," said Gatete releasing the monetary policy and financial stability statement yesterday at Kigali Serena Hotel.
He, however, said the National Bank of Rwanda monetary policy this year would be implemented in a challenging international environment, which might have a negative impact on the economy.
Rwanda is likely to be affected by the consequences of the unsolved sovereign debt crisis in Europe and concerns over the fiscal cliff in the US can have on the global economy, Gatete added.
"The persistence of these crises is expected to induce a decline in commodity price, hurt foreign direct investments, NGOs transfers and remittances from the Rwandan Diaspora, and the decline in official aid transfers, including budget support," said Gatete.
He added that such a decrease in external inflows would create challenges to maintain adequate liquidity in the banking sector, necessary to meet the increasing demand for credit to the private sector.
It would also have a negative effect of sustaining pressures on the Rwandan franc exchange rate with the risk of significantly increasing the exchange rate pass-through domestic prices as the country is a net importer.
He was optimistic though that the stability of international oil prices and prospects for low global and regional inflation this year would help reduce the negative effects of these risks.
Meanwhile, agricultural export products such as tea, coffee and pyrethrum dominated over the period.
Exports and imports
Governor Gatete said last year, the formal exports' value amounted to $482.7m (about Rwf301.5b) from about Rwf244.3b in 2011, which was a 24.8 per cent growth year-on-year, while formal imports were worth $1,759.3m over the period.
The imports, mainly dominated by food products (36 per cent), of which oil, cereals and sugar represented a 77 per cent share of total food import increased by 27.3 per cent in volume.
Capital goods, which are dominated by transport materials and machines and tools increased in both value and volume by 35.1 per cent and 34.8 per cent, respectively.
Import of intermediary goods in 2012 rose by 26.1 per cent in value and by 33 per cent in volume, driven by industrial products and construction materials.
Import of construction materials increased by 26.7 per cent in volume and 12.8 per cent in value, of which a big part is attributed to cement increasing by 32.5 per cent in volume and 33 per cent in value as well as metallic construction materials increasing by 12.4 per cent in volume but declining by 3 per cent in value.
The share of imported cement (in volume) increased to 82 per cent of the domestic demand in 2012 from 76 per cent in 2011.