African Development Bank says Rwanda’s economy to grow at 7.8 percent in 2023

Rwanda’s economy is projected to grow at 7.8 percent in 2023 and 8.1 percent in 2024, according to the African Development Bank (AfDB).

The Ministry of Finance implied that the economy grew by 6.8 percent in 2022.

In a report on Africa’s Macroeconomic Performance and Outlook released on January 19, the continental development bank says Rwanda will lead economic growth in the region mainly due to higher infrastructure spending.

This is while the country’s external debt distress remained moderate over the past three years, of which the International Monetary Fund says its due to the fact that close to 80 percent of Rwanda’s debts are concessional loans.

Overall, 2022 was not an easy year for all economies due to the post-pandemic shocks in supply chains and a heavily felt inflation mainly attributed to the Russia-Ukraine crisis on economic activities, among other factors like climate change.

Many mechanisms such as revising the monetary policy and the government’s intervention in form of subsidies were put in place to cushion the impact from consumers.

In Eastern Africa, economic growth is estimated to have moderated to 4.2 percent in 2022 from 5.1 percent in 2021, however, it is projected to rise to 5.0 percent in 2023 and 5.4 percent in 2024.

The worry remains, according to the bank, that while the production structure is relatively diversified, countries in the region are largely net importers of commodities and bear the brunt of high international prices in addition to recurrent climate shocks such as drought, particularly in the horn of Africa.

Poverty driven by inflation

The report also highlighted that the rising food and energy price inflation could exacerbate food insecurity and malnutrition in Africa.

“High levels of undernutrition in Africa reflects the rise in prevalence of severe food insecurity from 16.7 percent in 2014 to more than 23.4 percent since 2021,” it stated.

This is reflected in the increase in the number of severely food insecure people, which increased from 192.1 million in 2014 to 322 million in 2021. The recent rise in food and energy prices could thus worsen food insecurity and malnutrition on the continent.

In Rwanda, the combined effect of food and energy prices on extreme poverty is estimated at 23 percent in 2022.

“Despite significant headwinds, Africa’s real GDP growth is projected to stabilize at 4 percent in 2023–24, 0.2 percentage points higher than the 3.8 percent recorded in 2022. Average inflation is projected to decline from 13.8 percent in 2022—the highest in more than a decade—to a single digit of 8.8 percent, in 2024.”