Recent Developments & Prospects

Macroeconomic Policy

Fiscal Policy

Monetary Policy

Economic Cooperation, Regional Integration & Trade

Debt Policy

Economic & Political Governance

Private Sector

Financial Sector

Public Sector Management, Institutions & Reform

Natural Resource Management & Environment

Political Context

Social Context & Human Development

Building Human Resources

Poverty Reduction, Social Protection & Labour

Gender Equality

Thematic analysis: Structural transformation and natural resources

Authors: Edward Batte Sennoga, Bernis Byamukama

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  • Real GDP growth slowed down to 4.6% in 2013 from 7.3% in 2012 due to the lower than programmed performance in agriculture and the aid-related delays in the implementation of strategic public investments following the suspension of budget support disbursements in 2012. Growth is projected to recover to 7% and 7.4% in 2014 and 2015 respectively due to the recovery in services, improvement in agriculture productivity and sustained implementation of the public investment programme.
  • Major steps were taken to further enhance political rights and civil liberties. Three new media pieces of legislation were ratified to improve media regulation, promote transparency and encourage citizens’ economic and political participation. Moreover, another political party was formally registered.
  • Strong progress in human development continues to be registered. The infant mortality MDG has been achieved, and Rwanda is set to meet the targets for universal primary education, gender equality and under-five mortality. Poverty and income inequality have also decreased.

Real GDP growth slowed in 2013 in part due to poor performance in agriculture and the lagged effects of the suspension of budget support disbursements in 2012. Estimates indicate that industry and services were the primary drivers of growth in 2013, while growth in agriculture, though modest, was stronger compared to 2012. Export earnings increased by an estimated 33% in 2013 compared to the previous year on the back of increased coffee and tea production and favourable prices for key mineral exports, particularly coltan and cassiterite. GDP growth is projected to have increased from 4.6% in 2013 to 7% in 2014. The key growth drivers in the short and medium term include recovery in the services sector, increased productivity in the agriculture sector and the sustained implementation of the public investment programme.

Headline inflation is projected to increase slightly to 4.4% in 2014 due to rising food prices. Structural reforms to improve productive capacities, particularly in agriculture, are expected to contribute to a reduction in food prices and ensure that headline inflation remains below the central bank’s medium-term inflation target of 5.0%. Decisive implementation of programmes such as the National Employment Program and sustained investments in improving agricultural productivity are expected to increase jobs and drive growth in the medium term. Current account deficits are expected to persist in the short to medium term as strong demand for intermediate, capital and energy products continues to outstrip the expanding but still narrow export base. The share of export earnings to imports increased to 32.0% in 2013 compared to 27.0% in 2012.

Embedding domestic firms into global value chains (GVCs) is a priority for government and is viewed as a key vehicle for promoting export growth and diversification and contributing to the broader goal of achieving a private-sector-led economy by 2020. The potential for linking national value chains (NVCs) with GVCs exists in several industries, including exports (especially coffee, tea and minerals), food processing, dairy and beverages, ICT and Business Process Outsourcing (BPO). Most of the current value chain activities are upstream, focusing on the development and supply of primary and intermediate inputs to export markets. There is also evidence of downstream activities, for instance in tea and minerals, with key packaging and processing activities being undertaken in intermediate countries before the final products are shipped to export markets. Expanding linkages between NVCs and GVCs will require addressing three key factors: supply constraints, improving the quality of domestic raw materials and addressing infrastructure bottlenecks, particularly in energy and transport.

Table 1: Macroeconomic indicators

Real GDP growth7.34.677.4
Real GDP per capita growth5.
CPI inflation6.
Budget balance % GDP-1.2-5.1-4.8-4.3
Current account balance % GDP-11.4-10.2-10.7-10.1

Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.