Rwanda's Central Bank Governor discusses country's economic outlook

Rwanda's economy has shown resilience despite global economic challenges, with accelerated growth projected for the country amidst easing inflation and decreasing commodity prices. In an exclusive interview with CNBC Africa, National Bank of Rwanda Governor, John Rwangombwa, discussed the country's economic outlook and key factors shaping its trajectory. The global economy is expected to slow down in 2023 due to unfavorable financial conditions, high commodity prices driven by the war in Ukraine and COVID-related spillovers. Global economic performance has decreased from 3.6% in 2022 to a projected 2.9% in 2023, a significant drop from 6.2% in 2021. This slowdown is attributed to tight economic conditions, supply chain disruptions, and high commodity prices. However, there is an expectation of easing inflation at the global level, with oil prices decreasing due to reduced global demand. In Rwanda, the economy remained robust in 2022, with a GDP growth rate of 8.2%, driven primarily by the service sector and a recovery in the tourism industry. Despite challenges in the industry sector, particularly related to construction, the economy is expected to stay strong in 2023. Inflation is forecasted to remain high in the first half of the year, with expectations of reaching the target range of 8-2% by the end of 2023 or even earlier if the agricultural season proves favorable. The financial sector in Rwanda has demonstrated stability and resilience, with strong capital bases and improved credit portfolios, recording non-performing loans at around 3.5%, below the industry benchmark. Governor Rwangombwa highlighted the success of financial reforms implemented since 2017 in enhancing the sector's strength. The recent decision to raise the policy rate to 7% in February 2023 was aimed at addressing inflationary pressures, with indications that the policy measures are yielding results as inflation begins to decline. Despite global banking challenges such as the collapse of institutions like Silicon Valley Bank and Credit Suisse, Rwanda's financial sector is seen as insulated due to limited integration with the global financial system. Regulators have been proactive in taking corrective actions, minimizing the risk of contagion effects. Commodity price deceleration, especially in energy and non-energy sectors, is expected to positively impact inflation and monetary policy in Rwanda. While reduced import costs may benefit the country's economy, there may be implications for export revenues, particularly in metal exports. The rise in savings within the financial sector is seen as a positive development, although efforts to further boost domestic savings are underway by leveraging digital products. Trade relations with the Democratic Republic of the Congo (DRC), Rwanda's largest trade partner, have remained stable, with minimal disruptions reported, indicating healthy trade flows. Governor Rwangombwa expressed optimism that ongoing efforts to enhance regional stability will continue to support trade relationships. The impact of a global dollar shortage, particularly in neighboring countries like Kenya, on Rwanda's currency remains a concern, with pressures on the foreign exchange market persisting. However, the governor remains hopeful that reduced global commodity prices will alleviate some of the currency pressure in the near future. Overall, Rwanda's economic prospects look promising, supported by prudent policies, a resilient financial sector, and efforts to navigate global challenges effectively.