Rwanda Economic Update : Lighting Rwanda

In 2018, the economy expanded at a brisk pace - Rwanda's 8.6 percent growth was the highest onthe continent. Growth was broad-based. Recovering from the droughts of 2016 and 2017, agricultureexpanded by almost 6 percent, above the historical rate of growth of around 5 percent. Industry grew by more than 10 percent, the highest growth since 2012. It was supported by 14 percent growth in construction, where activity resumed after two years of compression, and by 11 percent growth inmanufacturing. Among the key sectors, however, the service sector contributed most combiningits highest share in the economy with a 9 percent growth. On the demand side, investments were themain driver of growth, expanding by 23.5 percent led by strong public investment. After stagnatingin 2016 and 2017, private consumption grew by 6 percent. However, the contribution of net exports to growth turned negative in 2018 because Rwanda's exports were not able to maintain the momentumgenerated in 2017. Inflation remains low. Headline inflation as of March 2019 was 1.2 percent. A supportive macroeconomic environment has allowed the National Bank of Rwanda (BNR) to keep the policy rate at 5.5 percent throughout 2018 and reduce it further to 5 percent in May 2019. The Rwandan franc had depreciated by less than 1 percent in nominal effective terms as of April 2019 (year-on-year) while its depreciation against US dollar was about 4 percent as a result of strengthening of the US dollar against main currencies. Nonperforming loans continued to trend down in response to a new regulation on credit classification and provisioning. Credit growth, however, is still slow: having seen their credit portfolios deteriorate in 2016–17, banks continue to be risk-averse. Although the volume of new loans is larger, the loans are concentrated in several large-scale projects. The banking sector continues to be well-capitalized—the ratio of capital to risk-weighted assets is well above the minimum required and continued to improve.