{The country’s Gross Domestic Product (GDP) growth is projected at 7 percent in the next four years as a result of fiscal consolidation and deficit narrowing that are likely to keep the economy buoyant in the period under review.}
This comes at the time when the Standard & Poor’s (S&P) Ratings Services raised its long-term foreign and local currency sovereign credit ratings on Rwanda from B to B+ claiming that the economic outlook is stable.
The stable outlook reflects S&P view that stability of external funding will support Rwanda’s external position over a one-year horizon, while the fiscal position will not significantly deteriorate from the current forecasts,” the report that was released last week indicated
According to the ratings, the country’s Real Gross Domestic Product (GDP) growth rates have shown significant increase to more than 6 percent in 2014 up from 4.6 percent in the same period in 2013 and is estimated to grow to 7 percent this year before it remains steady till 2018.
Whilst, Rwanda’s GDP per capita is estimated to grow at US$730 in 2015 but sluggishly grow at 3.7 percent over a ten year period puts it behind Ethiopiaand Mozambique which are considered faster growing at rate of 6.3 percent and 5.2 percent respectively.
“Government activity, both consumption and investment–makes the largest contribution to GDP, while the private sector is still small but growing,” indicated the report.
Moreover, the positive outlook is also backed by the stabilization in donor flows and the efforts by government to reduce donor reliance through increasing the ratio of domestic tax revenues to GDP under the new International Monetary Fund policy support instrument agreement.
The government isoptimistic that through taxes on mining, property taxes now collected at central government as well as review of value Added tax-VAT exemptions is likely to increase domestic financing of the budget, but the report say “this will be achieved over the medium- to long-term.”
The outlook according to the report is also backed by the near completion of financing of capital expenditures through the Eurobond issue.
“Risks to Rwanda’s external financing are reducing owing to stable donor flows and the government’s ability to access the capital markets,” the report added
Experts believe that the country’s stability in external financing and continued government investment spending is likely to back up higher economic growth rates in the next four years.
The report also forecasts government deficits to grow at an average of 3 percent of GDP compared to 4.5 percent in the same period from 2011 while government debt is likely to average at 3 percent of GDP.
{{Source: Rwanda Eye}}
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