Rwanda: IMF Projects 2% Growth for Rwandan Economy

22 October 2020

Rwanda's economy will grow by 2 per cent in 2020 before rebounding back to strong growth rates next year, the International Monetary Fund has noted.

While this is a slowdown in comparison to 9.4 per cent growth in 2019, Rwanda will be one of the few African countries to experience growth.

Following the Covid-19 pandemic, economies across the world have been adversely affected and are undergoing a recession.

Sub-Saharan Africa is expected to experience a recession, contracting by 3 per cent with a majority of countries experiencing negative growth rates.

This represents a drop in real per capita income of 5.3 per cent in 2020 which is at the level as was in 2013.

Per capita income is a measure of the amount of money earned per person in a nation.

For Rwanda, the IMF projected a growth of 2 per cent for 2020 and 6.3 per cent in 2021.

Despite the growth, Rwanda can anticipate a rise in consumer prices by an annual average of about 6.9 per cent in 2020 from 2.4 per cent in 2019.

Growth in consumer prices is calculated using Consumer Price Index (CPI), which examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

It is calculated by taking price changes for each item in the 'basket of goods and services'. The changes can be used to assess price changes linked to the cost of living.

In Rwanda, CPI is calculated based on 'household basket' which includes 1,622 products sold across the country.

In the process, the National Institute of Statistics makes observations in various places including shops, markets, hospitals, schools among others.

More than 29,000 prices in urban areas and 10,000 in rural areas are collected every month.

In July, it emerged that the urban Consumer Price Index increased by 9.2 per cent compared to July 2019 and increased by 0.2 per cent compared to June 2020.

For the Sub-Saharan Africa region, with a difficult recovery ahead, the IMF noted that policymakers have fewer resources at their disposal as they cautiously lift restrictions and reopen economies.

Abebe Aemro Selassie, Director of the IMF's African Department, said that in 2021 regional growth is forecast at 3.1 per cent in 2021 which is less in comparison to most parts of the world.

"This is a smaller expansion than expected in much of the rest of the world, partly reflecting sub-Saharan Africa's relatively limited policy space within which to sustain a fiscal expansion. Key drivers of next year's growth will include an improvement in exports and commodity prices as the world economy recovers, along with a recovery in both private consumption and investment," he said.

In October, Rwanda is set to benefit from a $16.9 million debt service relief from the International Monetary Fund for an initial period of 6 months.

This was the second debt service relief to Rwanda by the IMF following the $11 million debt service relief approved in April to help address the impact of the Covid-19 pandemic.

By not servicing its debt obligation for several months, Rwanda will have more capital available to invest in affected aspects of the economy as well as improve capacity to respond to the pandemic.

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