Public Management

Rwanda: IMF sees real GDP at +10.2% by end 2021

Wednesday, 12 January 2022 13:59
Rwanda: IMF sees real GDP at +10.2% by end 2021

(Ecofin Agency) - The International Monetary Fund (IMF) expects Rwanda's real gross domestic product to grow by 10.2% in 2021, according to its recent consultation report with the country's authorities and review of ongoing economic programs. This forecast differs from the 5.9% projected by the global economic outlook.

IMF justifies its view by " a recently accelerated vaccination campaign targeting high-infection areas, the pickup in external demand, continued government support, and base effects from the 3.4 growth contraction observed in 2020.”

Real GDP is an indicator that measures the creation of additional value-added in a country without taking into account price increases. This provides a better measure of the quality of Rwanda's economic recovery, which does not depend solely on factors such as inflation. If the context remains stable, the country is expected to grow by an average of 7.2% over the next few years.

The institution however warned that an effective recovery will depend on the evolution of the Covid-19 pandemic. “At the same time, it is critical that the authorities continue advancing growth-friendly policies and reforms that will underpin the credibility of the multi-year fiscal consolidation plan that is essential to safeguard debt and external sustainability. These efforts need to be complemented by measures to strengthen the management of fiscal risks from state-owned enterprises and public-private partnerships and by enhancing fiscal transparency,” the statement reads.

If Rwanda ends with a 10.2% increase in real GDP, this will be a slowdown in the dynamics observed during 2021. According to the monetary policy report published by the Central Bank in November, this indicator showed an average evolution of 12% at the end of H1 2021. It even reached +20.6% in Q2 2021.

The country currently enjoys strong fundamentals, with an increase in industrial and service activities, but also a low level of inflation. This gives the Central Bank more room to support the financial sector. However, it will be necessary for the leaders and the business community to anticipate price increases on imported goods and a significant devaluation of the local currency.

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