Economy to grow at 5.7 percent this year – World Bank 

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The country’s economy is forecasted to grow at 5.7 percent this year and 6.6 percent next year up from 4.7 percent in 2013, the World Bank’s Rwanda economic Update report stated.

The report says the rebound this year is attributed to the growth of the services sector that contributed to a growth rate recovery of 7.4 percent in the first half of 2014.

“In addition to GDP growth rates, turnovers of services and industries have been picking up. Therefore, we are hopeful that the growth in 2014 will be higher than that in 2013” said Toru Nishiuchi, World Bank Economist and co-author of the report.

The slowdown in 2013 according to the report was as a result of the aid shortfall in the second half of 2012 and resulting delays in budget expenditures   which   showed structural bottlenecks in the economy.

“The lagged effect of the aid shortfall to the economy was extended to the second half of 2013, decelerating both public and private sector activities. However, signs of recovery are evident in 2014,” Turk said

Experts say that banking on the impressive growth of the country’s economy in the past decades, there   is now need for a significant structural transformation of the economy which will require a large public sector, by a dominance of the non-tradable sectors and by limited private investment.

“This kind of transformation would minimize current vulnerabilities in the economy and enable Rwanda to sustain its high growth rates into the next decade.” said Carolyn Turk, World Bank Country Manager for Rwanda.

According to the report, growth during the last decade was driven by high levels of public investment supported by significant aid inflows and effective use of them.

The World Bank also advises that   country should look at increasing domestic resource mobilization and transformation in spurring private sector–led growth, if the anticipated growth is to be realized and future growth guaranteed.

“Going forward, Rwanda needs to transform its economy from being aid dependent, public sector led, and domestic demand driven, to being self-reliant, private sector led, and net export led through addressing constraints to private sector investment such as energy and transport,”  said Toru Nishiuchi.

Thus attracting more investments in the energy sector to spur growth in the industry, manufacturing and services sectors as well as increasing production of key sectors such   mining, tourism and exports would help the growth rate to continue going upwards.

 

“In this regard, public investment will focus more on how to leverage private sector investment,” explained Nishiuchi.

The report which brings out a special focus on the country’s predominantly small-scale mining sector that is vital due to its contribution to the real GDP, notes that transforming the sector into semi-industrial and industrial activities would also contribute to sustained economic growth.

This is as a result of the sector’s positive performance that saw its export earnings in 2013reaching US$225 million accounting for over 40 percent of the total goods exports in the same year which was driven by  investments I n the sector by the government which increased both the sector’s volumes and value.

“Beyond export earnings, mining shows promise for non-farm job creation, an important pillar of the government’s poverty reduction strategy,” said Rachel Perks, World Bank Mining Specialist, and co-author of the report.

She adds, “As of early 2014, mining in the rural areas directly employed more than 33,000 people. Mining jobs also pay better when compared against other wage workers in the rural areas”.

To benefit from the reform outcomes in the country’s budding sector, the government   should focus at securing the enabling Legal and Regulatory Environment for Investment, Build the Geological Knowledge Base for Future Investment.

Again emphasis should be put on increasing Increase Fiscal Receipts and Ensure Revenue Management, Improve Recovery and Domestic Processing as well as Strengthen Human Development.

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Olive Ndaka is the Junior Editor for RwandaEye. An investor and young entrepreneur, she is a quick learner and has contributed many articles for RwandaEye in Kinyarwanda.

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