Rwanda Advised to pay Attention to Macro-Economic Stability

{{A Senior economist at the World Bank, Yoichiro Ishihara has advised Rwanda to pay more attention to macro-economic stability because the impact of external shocks will be much higher than in 2012.}}

Mr. Ishihara made the remarks during the launch of the World Bank’s fourth edition of the Rwanda Economic Update report.

“The year 2013-2014 predicts positive economic growth progress in Rwanda, but the economy was still vulnerable because the impact of external shocks will be much higher than a year ago,” he said.

He expalined that the bottom line is to ensure strong growth rate in 2013 and recognising some vulnerability because weak economic growth will continue to be the norm in developed countries, with low or negative rates of growth, including in Rwanda’s major bilateral donors.

According to the report, Rwanda’s economy will grow by 7.0% in 2013 before recovering to 7.5 % in 2014.

The slowdown in 2013 growth is driven by lower public expenditures associated with the aid reduction during the current fiscal year.

“The aid shock has demonstrated not only the government’s prudent macroeconomic management capacity, but also the vulnerability of the economy to the volatility of aid,” noted Ishihara.

Due to the growing concerns over financial sector stability, in July 2012, the National Bank of Rwanda created the Financial Stability Committee (FSC) to monitor financial market conditions and risks.

The survey recognises the positive and steady economic growth registered by Rwanda in the past few years where the country’s economy grew by 8 per cent in 2012, making it the fastest growing economy in the region.

The report states that the strong growth in 2012 is attributed to a resilient private sector performance especially in the services sector with trade, telecommunication and transport generating about 40 per cent of 2012 real GDP growth.