Rwanda Maintains Strong Growth Momentum in Early 2023

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Rwanda’s economy grew by 9.2% in the first quarter of 2023, following 8.2% growth in 2022. But recent floods, resulting in the loss of life and destruction of infrastructure, are expected to moderate this momentum to 5.8% in 2023 against a pre-disaster forecast of 6.2%.

The 21st edition of the World Bank’s Rwanda Economic Update (REU) highlights positive developments in the country’s economic landscape. Momentum in growth was supported by private consumption and the services sector, accompanied by improvements in the labor market.

Inflation has eased, although it remained above the target range set by the National Bank of Rwanda during the first half of 2023. The REU says Rwanda's current account deficit improved in 2022, driven primarily by higher export revenues and remittances, which outweighed rising import prices. The fiscal deficit also narrowed in the first half of FY2022/23, due to a drop in public spending.

“A narrowing fiscal deficit, coupled with strong economic growth, has contributed to a reduction in Rwanda's debt as a percentage of GDP for the first time since 2013,” said Peace Aimee Niyibizi, World Bank Country Economist for Rwanda and author of the REU. “The government is encouraged to maintain a path of fiscal consolidation by rationalizing expenditure and raising domestic revenues amid declining foreign aid.”

A timely implementation of the country’s revised excise and corporate income tax laws, as well as plans to step up efforts to develop a strategy for medium-term spending, would support fiscal consolidation, adds the REU.

As its special topic, this 21st Rwanda Economic Update examines the inclusiveness of Foreign Direct Investment (FDI). While FDI inflows slowed during the COVID-19 pandemic, the report says, at their peak in 2014 these were well above the Sub-Saharan and East African average. FDI inflows, supported by a favorable regulatory environment, have played a crucial role in generating higher-quality jobs and access to social security, compared to their domestic counterparts.

“To improve the inclusiveness of FDI, Rwanda needs policies that focus on institutional reforms and infrastructure investments that will stimulate FDI to create jobs for women and youth and expand investment into poorer districts,” said Rolande Pryce, World Bank Country Manager for Rwanda.

The REU also recommends improvement be made to corporate social responsibility initiatives and to links between FDI projects and domestic suppliers, and it mentions the need to bolster dialogue between the government of Rwanda, investors, and other countries’ governments.

Distributed by APO Group on behalf of The World Bank Group.