Category: Economy

In the first quarter, the service sector was the main contributor with 46% of GDP followed by agriculture sector (27%) and industry (20%) while and 8 percent was attributed to adjustment for taxes and subsidies on products.

In the first quarter of 2021, GDP at current market prices was estimated at Rwf 2,579 billion up from Rwf 2,410 billion of the same quarter in 2020.

Agricultural activities grew by 7 percent and contributed 1.7 percentage points to overall GDP growth. Within agriculture, the production of food crops increased by 7 percent while the production of export crops increased by 7 percent too.

Industrial activities grew by 10 percent and contributed 1.7 percentage points to GDP growth. The main contributors in the industry sector were construction activities which grew by 14 percent and manufacturing activities which grew by 8 percent. Mining and quarrying activities also increased by 3 percent.

The growth in manufacturing activities is attributed to an increase of 7 percent in food processing, 17 percent in Wood & paper; printing, 29 percent in metal products, machinery & equipment and 20 percent in production of Chemicals and plastic products. However, textiles, clothing & leather goods and non-metallic mineral products declined by 2 percent and 3 percent respectively.

Service sector remains at the same level of quarter one of 2020, thus 0 percent growth. Within services sector, information & communication services increased by 18 percent, professional, scientific & technical activities increased by 10 percent, real estate activities increased by 3 percent while education increased by 5 percent.

However, human health & social work activities decreased by 12 percent, hotel and restaurant services by 34 percent, administrative and support services by 4 percent and public administration and defense; compulsory social security by 2 percent.

NISR has revealed that total final consumption expenditure decreased by 2 percent in the first quarter of 2021, with household final consumption declining by 2 percent while Government final consumption remained constant at 0% growth. Exports decreased by 19 percent, imports decreased by 22 percent while Gross Capital Formation increased by 3 percent.

Addressing lawmakers, Minister Tusabe noted that policies and strategies over the medium term are guided by the National Strategy for Transformation (NST1) program.

He however underscored that as Rwanda is still dealing with the effects of COVID-19 pandemic, the Government will continue to accommodate COVID-19 spending and the cost of the vaccination rollout program core for economic recovery.

“Our outlook is for a gradual recovery in economic activity from the drop of 3.4 percent in 2020. The economy is projected to grow by 5.1 percent in 2021, 7.0 percent in 2022 and on average by 7.8 percent in 2023 and 2024. This growth projection reflects the actions already in place or that will be put in place by Government to mitigate the economic impact of COVID-19, by providing support to vulnerable households and stimulate employment by supporting investments from the private sector.” Minister Tusabe said.

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Minister Tusabe told parliamentarians that the budget for fiscal year 2021/22 will reflect medium term fiscal path which allows for an increased spending to reach NST1 goals while maintaining public debt at sustainable levels.

The total resources projected for the fiscal year 2021/22 is Rwf3,806.9 billion, made up of domestic resources amounting to Rwf 2,543.3 billion (comprising of Rwf 1,717.2 billion from tax revenue) and Rwf1,263.7 billion from external resources.

On the expenditure side, key priorities will include; access to quality health, increasing agriculture and livestock productivity, scaling up social protection coverage, improving the quality of education, and supporting businesses (through the economic recovery fund and the manufacturing, build to recover program) to invest for recovery.

BFP is a document outlining government economic policies over the medium term that helps lay the foundations of the next fiscal budget. It is prepared in accordance with article 32 of the Organic Law on State Finances and outlines the Government’s macroeconomic and fiscal policy stance as well as the budget policy over a 3-year horizon. The 2021/22-2023/24 BFP provides basis for the preparation of the 2021-22 budget which will be read in June 2021.

In 2020, COVID-19 had a profound impact on Rwandan economy. In addition to the public health challenge, COVID-19 had also severely affected many economies following measures that were and are still being implemented to contain the spread of the virus.

Apart from the 1st Quarter that was not hit hard by the pandemic, the remaining 3 Quarters recorded negative growths whereby the 1st quarter grew by 3.7%; 2nd quarter: -12.4%; 3rd quarter: -3.6%; and 4th quarter by -0.6%.

This led to a 3.4% drop in economic growth for the year 2020. Even though restrictive measures to contain the spread of the virus were gradually relaxed since May 2020, economic activities have not recovered fully to pre COVID–19 levels.

Activities related to hospitality industry as well as Education continued to be the most affected.

In 2020, Services contributed 46% to GDP, Agriculture contributed 26% while Industry contributed 19%. Net direct taxes accounted for 8%.

In 2020, GDP decreased by 3.4% compared to the growth of 9.5% in 2019.

The agriculture sector increased by 1%, industry dropped by 4% while services dropped by 6%.

Although the country expects the situation to improve in 2021 going forward; Hotel and restaurants were the most affected dropping by 40% followed by Education which dropped by 38% and Transport activities that dropped by 24%.

Among others, wholesale and retail trade dropped by 3% in 2020, construction activities also dropped by 6% following a high growth of 33% recorded in 2019.

However, Information and communication sector grew by 29% while Health sector grew by 19% due to efforts taken to contain Covid-19 pandemic.

The statement is meant to assess economic and financial developments of the year 2020 and give an outlook for the year 2021 and beyond.

In 2020, mobile banking transactions increased in volume by 183 percent from 2 million to 6 million and by 224 percent in value from Rwf 85 billion in 2019 to Rwf 277 billion of transactions.

During 2020, active mobile payment subscribers (transacted in the previous 90 days) increased by 13 percent from 4,139,075 to 4,688,124 while the number of mobile agents increased by 33 percent from 98,359 to 131,173. Mobile payment transactions increased by 85 percent from 378.8 million worth Rwf2,349 billion Rwf in 2019 to 701 million worth Rwf 7,177 billion Rwf in 2020.

The report shows that comparing 2019 to 2020, the portion of cash-based transactions significantly reduced as a consequence of various policies taken to encourage digital payments and minimize the risk of COVID-19 spreading.

Banks which provided internet-banking services increased to thirteen (13) from nine (9) in December 2019 and the number of subscribers increased by 9 percent from 91,825 in December 2019 to 99,810 in December 2020.

In 2020, internet banking transactions increased by 7 percent to 1,445,174 in 2020 from 1,352,301 in 2019 and by 4 percent in terms of value to Rwf 2,362 billion in 2020 from Rwf 2,276 Billion in 2019

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The number of traditional Point of Sale (POS) machines increased from 3,477 in December 2019 to 4,335 in December 2020. During this period, POS transactions increased by 56 percent in volume from 2,426,456 in December 2019 to 3,780,051 in 2020, while in value, POS transactions increased by 9 percent from Rwf 109 billion in 2019 to Rwf 120 billion in December 2020.

On the other hand, Automated Teller Machines (ATM) decreased from 383 in 2019 to 334 in 2020 due to the fact that two banks moved from ATMs services to Agency banking services. In terms of usage, ATM transactions decreased by 9 percent in volume from 10,061,164 in 2019 to 9,203,942 in December 2020, though the value increased by 17 percent in value from Rwf 578 billion to Rwf 679 billion considering that most people have been withdrawing larger amounts due to the limited access to ATMs during the lockdown period.

Mobile POS contributed the most to increased usage of electronic payments compared to other types of POS during the period under review.

As at end of December 2020, the number of mobile POS increased significantly to 39,7434 in December 2020 from 13,675 in 2019 due to increased adoption by various businesses such as supermarkets, retail shops, health centers and specifically microbusinesses.

It has been revealed following the quarterly Monetary Policy Committee (MPC) meeting held on 18th February 2021.

The committee reviewed outcomes of its previous decisions and assessed the recent economic developments and the outlook at the global and national level.

Rwanda’s real GDP contracted by 4.1% in the first three quarters of 2020, compared to the growth of 8.3 percent registered in the corresponding period of 2019.

However the second half of 2020, recorded a gradual recovery, on the back of supportive policy measures and easing COVID-19 containment measures.

The statement released by BNR shows that estimated recovery is evidenced by the rising trend of the real Composite Index of Economic Activities (CIEA), which increased by 9.4% in the second half of 2020 from a contraction of 2.1 percent recorded in the first half of 2020.

“This domestic economic recovery is expected to continue in 2021, supported by policy interventions to revive business activities, despite the uncertainty around COVID-19 and its containment measures. The rollout of the COVID-19 vaccine globally and in the country will also enhance private sector optimism, hence stimulating the recovery in economic activities,” reads the statement in part.

BNR has also revealed that the monetary sector remained resilient in 2020, owing to supportive policy measures, amid, subdued demand for loans by the private sector during lockdown.

Broad money grew by 18.0 percent in 2020 compared to 15.4 percent recorded in 2019, supported by the increase in the outstanding Credit to the Private Sector (CPS) which grew by 21.8 percent from 12.6 percent the previous year.

The expansion in CPS was essentially driven by restructuring of loans granted to borrowers whose activities have been negatively affected by the pandemic, and new authorized credit disbursed in 2020.

Among others, foreign exchange market remained stable, whereby, the Rwf depreciated by 5.5 percent year-on-year as of December 2020 against the USD from a depreciation of 4.9 percent in December 2019.

The statement shows that pressures of the Rwandan Franc came during the second half of the year, following the resumption of economic activities and the increase in the demand for foreign currencies amid lower foreign inflows. However, the foreign exchange market is expected to remain stable, with adequate foreign exchange reserves held by NBR covering 5.9 months of imports as of December 2020.

According to estimates published by International Monetary Fund (IMF) in January 2021, the global economy contracted by 3.5 percent in 2020, owing to negative impact of COVID-19. In 2021, the global economy is expected to recover and grow by 5.5%.

However, the strength of the recovery is expected to be uneven and unequal across countries depending on factors like; access to vaccines, effectiveness of policy support, exposure to cross-country spillovers, and preexisting economic conditions.

Overall, credit risk, capital strength, operational resilience of systems and people due to remote working have been reported as the main areas of concern that will be the supervisory priorities going forward.

The financial sector is expected to remain resilient in the near term on account of existing capital and liquidity buffers as well as economy recovery hinged on the planned global domestic rollout of the vaccine commencing in the first quarter of 2021.

As per the committee’s observations during a quarterly meeting held on 16th February 2021, assets of the financial sector increased by 24% 9 year –on- year) to Rwf 4,310 billion in December 2020 (and represented 53 percent of GDP), against 12.5% registered in December 2019 on the back of growth of deposits (especially institutional investors), borrowings from other financial institutions and injections.

Microfinance sector’s assets increased by 11 percent to Rwf 356 billion in December 2020 lower than 14.7% percent in 2019 as the pandemic significantly impacted the cash flows of households, micro, small and medium enterprises, thereby reducing their capacity to save and increasing their deposit withdrawal needs to cater for the pandemic’s uncertainties.

Insurance sector’s assets (private and public) grew by 15 percent to Rwf 591.7 higher than 14 percent growth registered in the previous year due to retained earnings and capital injections.

Growth of the public pension fund assets moderated to 10.7 percent to Rwf 985.6 billion as at the end of December 2020, lower than 15.3 percent growth registered in 2019 due to revaluation losses on some assets as well as reductions in pension contributions following suspension of some employers from declaring and paying pension contributions, reduced employees’ salary base in some institutions, either due to reduction in salaries or termination of some employees in response to the pandemic.

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The pandemic and required containment measures resulted in a contraction of GDP by 4.1 percent year-on-year in the first three quarters of 2020, led to a reduction in incomes of households and businesses thereby weakening debt service capacity, and increased credit risk.

In response banks provided loan repayment deferrals to their customers and at the end of December 2020, restructured loans were worth Rwf 799.9 billion representing 31.7 percent of total loans.

In the microfinance sector, restructured loans stood at Rwf 14.8 billion representing 7 percent of total loans. Insurance premium receivables also increased from Rwf 4.9 billion in December 2019 to Rwf 8.5 billion in December 2020.

The significant restructured loans in the financial sector are indicative of a potential uptick of non-performing loans and provisions for bad loans in 2021 and into 2022.

{{Digital payments uptake }}

In 2020, Financial Service Providers (FSPs) increased their rollout and users increased the adoption of digital payment channels. The number of mobile payment subscribers increased by 13 percent from 4,139,075 to 4,688,124 while mobile payment transactions increased by 85% from 378.8 million worth Rwf 2,349 billion in 2019 to 701 million worth Rwf 7,177 billion in 2020.

Other electronic payment channels such as mobile banking, internet banking as well as card based payment services also experienced notable growth and recommended among other things, continued engagement with relevant stakeholders on measures to support recovery of severely affected sectors like tourism and its value chains, public passenger transport and education among others.