KIGALI, Sept. 6 (Xinhua) -- Rwanda's economic growth has been slowing down since mid-2016 resulting in a 6 percent growth in 2016 and in 4.2 percent annualized growth in the first quarter of 2017, but growth is expected to pick up in the second half of this year, a World Bank report said Wednesday.
The 10th edition of World Bank Rwanda Economic Update, launched in Rwanda's capital city Kigali attributed the slowdown mainly to a combination of drought, weak export prices and construction activities following the completion of large investment projects in 2016.
The report also said improvement in macroeconomic policy environment in 2017 with inflation decelerating to below 5 percent by June 2017, down from the peak of more than 8 percent recorded in February.
It indicated that depreciation of the exchange rate has also alleviated the pressure on foreign exchange reserves and is expected to contribute to narrowing of external imbalances.
On export sector performance, the report noted that exports increased from just 400 million U.S. dollars in 2007 to 1.6 billion dollars in 2016.
Non-traditional exports emerged as an important driver of that growth, laying the foundations for export-led growth in Rwanda.
Exports to the region, and especially to the Democratic Republic of the Congo and to the East African Community (EAC) countries, mainly as re-exports and through small-scale cross-border trade contributed the bulk of export growth.
"Although Rwanda's export sector is still small, the progress made in the past decade sends a clear message that an export-led growth is within reach for Rwanda, and country's long-term growth strategy should continue focusing on strengthening economy's capacity to produce exportable goods and services," Aghassi Mkrtchyan, World Bank Senior Economist said in a statement Wednesday.
The report called for maintaining a competitive real exchange rate by avoiding exchange rate misalignment, focusing on agriculture as a strategic sector that provides raw materials for emerging agribusiness.
The World Bank in its economic update also called for continued engagement at the regional level to identify and remove non-tariff barriers within the EAC region in order to ensure sustainable export growth.
Returning to a higher growth trajectory in 2018 is attainable, although there are risks, according to the report.
It projects that in the medium term, economic activity will benefit from the expected recovery of prices of traditional exports, including minerals, tea, and coffee.
But the key for sustaining growth at the rates in line with Rwanda's historical average is private sector investment activity, especially in the tradable and export oriented sectors, the report said.
