Rwanda Economic Update : Schooling for Learning – Strengthening Resilience of Education in Rwanda

In the first half of 2018, the economy continued to expand at a brisk pace, well on track for Rwanda to achieve 7.2 percent growth in 2018. GDP growth was 8.6 percent, following 9.3 percent growth in the second half of 2017. Growth in production was again broad-based. As it continued to recover from recent droughts, agriculture expanded by 7.6 percent. Industry has also regained momentum as large construction projects resumed and foodprocessing was strong. Growth in services was a healthy 8.7 percent. On demand side, investments were the main driver of growth. After stagnating for close to two years, private consumption grew 5 percent. Driven by strong domestic demand, imports rose by 12 percent in real terms. Exports continued to grow at a healthy 10.8 percent in real terms, although net exports contributed negatively, being outpaced by growth in imports. Solid growth was coupled with low inflation, and pressures on the exchange rate have dissipated. Headline inflation as of September 2018 was 1.2 percent. The Rwandan franc had by then depreciated by about 2 percent after the major external adjustment of 2017. A supportive macroeconomic environment has allowed the National Bank of Rwanda to keepthe policy rate at 5 percent throughout the year. Nonperforming loans are trending down with the help of a new regulation on credit classification and provisioning. Credit growth, however, is still slow: after seeing their credit portfolios deteriorate in 2016–17, banks have become more risk-averse. The banking sector continues to be well-capitalized—the ratio of capital to risk-weighted assets is well above the minimum requirements.