KIGALI, February 26, 2016 – The World Bank launched the ninth edition of the Rwanda Economic Update today. The report, projects the country’s economic growth rates at 7.1 percent in 2015 and 6.8 percent in 2016 moving from 7 percent in 2014.
Despite an adverse external environment, Rwanda has maintained steady growth and macroeconomic stability during the first three quarters of 2015, the report said. Growth rate during the first three quarters of 2015 reached 6.9 percent, almost the same as the average growth rate in the past five years.
The report, Rwanda Economic Update: Rwanda at Work, observed positive impacts of the decline in international commodity prices on the economy, given Rwanda is a net importer of oil. Trade balance of commodities (coffee, tea, minerals, re-exports and energy products combined) improved by 25 percent in 2015. The decline in mineral exports was mostly compensated by the decline in energy imports. A fall in oil prices has contributed to stable inflation rate.
However, the Rwanda Economic Update noted a significant fluctuation of gross international reserves whose level fell from US$1.1 billion in December 2013 to US$0.7 billion in August 2015 before recovering to US$0.9 billion in December 2015. “Despite the steady growth and macroeconomic stability in 2015, downside risks have been increasing, both externally and domestically. For example, the World Bank revised down its global and regional growth projections in 2016 and 2017. On the domestic front, delayed execution of the budget and inadequate financing for development are of concern,” said Yoichiro Ishihara, World Bank Senior Economist for Rwanda.
The special topic of Economic Update focuses on jobs. This is mainly due to two major reasons. First, Rwanda’s working-age population is growing rapidly, and a key challenge going forward will be to create sufficient jobs for a larger labor force. Second, as Rwanda continues to grow, the labor market will increasingly become the main transmission mechanism between overall growth and improving household living standards.
The report highlights three main employment dynamics in Rwanda over the past decade: (i) a substantial move towards non-farm occupations, mainly driven by the youth, (ii) an uptake of additional jobs, with more than 60 percent of Rwandan working several jobs, and (iii) an increase in labor earnings, mainly linked to the transition towards non-farm occupations and the uptake of additional jobs.
“Given that 70 percent of the workforce remains employed in agriculture, increasing earnings from agriculture remains the most direct way to improve economic conditions for the bulk of the population,” said Tom Bundervoet, World Bank Senior Poverty Economist for Rwanda. Adding that it will also be important to support the informal non-farm sector for job creation, as the formal sector is expected to remain small in the coming years in face of a rapidly growing labor force.