Resilience in Economic Adversity: Rwanda’s Growth Prospects Remain Favorable

November 17, 2011

KIGALI, November 17, 2011 – Rwanda has demonstrated economic resilience, against a backdrop of global and regional economic turbulence, volatile and rising food and fuel prices, a drought in neighboring countries and the looming crisis in the Euro zone, according to today’s RwandaEconomic Update, published by the World Bank. “This resilience is a result of sound macroeconomic management in times when regional and global shocks are having adverse consequences for many neighboring countries” said Johannes Zutt, World Bank Country Director for Rwanda.

The report, entitled Resilience in the Face of Economic Adversity: Policies for Growth with a Focus on Household Enterprises, predicts Rwanda’s 2011 growth at over 8 percent, a growth rate that is stronger than forecast for Sub-Saharan Africa as a whole. The report also notes that: Rwanda’s economic growth in the first half of 2011 was led by strong performance in the industrial and service sectors; inflation has so far been contained below 10 percent; and the exchange rate remains stable to date.

Additionally, although agricultural growth in the first half of 2011 was weak as late rains resulted in a disappointing first planting season outcome, good rains since then as well as the Government of Rwanda’s concerted and continuing efforts to increase agricultural productivity, led to a successful second season harvest. “Rwanda’s growth outlook is robust, but remains contingent upon sustained prudent macroeconomic management, moderate global growth in 2012 and declining fuel and imported food prices, which will help improve Rwanda’s current account position and enhance growth prospects. We also expect to see an estimated 10.6 percent overall increase in food production in 2011, compared to 2010, and high agricultural and overall grow in the second half of 2011” said Birgit Hansl, World Bank Senior Economist.

The Role of Household Enterprises for Employment Creation and Poverty Reduction in Rwanda

The Economic Update contains a preview of a forthcoming joint report of the World Bank and IPAR on Household Enterprises. The forthcoming report will conclude that Household Enterprises (HEs) are the source of livelihood for more than 30 percent of households, provide primary employment for 9 percent of the labor force and have grown rapidly over the last decade partly in response to the demand for additional services and goods generated by Rwanda’s growth and the relatively limited supply capacity of the formal sector.

Although HEs are usually not the main source of family income, they provide an important second income source, which in rural areas can help cushion shocks brought on by adverse weather conditions and temporary declines in agricultural production and in urban areas can complement formal wages, allowing for overall greater household consumption and investment” said Louise Fox, World Bank Lead Economist.

The report will accordingly suggest that considering the significant contribution HEs have made and can make in the future to income and employment creation, the Government of Rwanda could broaden its policy framework to provide specific, targeted support for the HEs sector.

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