Following a sharp slowdown in 2012, the Rwandan economy looksto have returned to the robust levels of growth that made it a regionaloutperformer for much of the last decade.Focus on infrastructure development by the Rwandan governmentwill continue to attract fixed investment into the country. Growth willbe maintained by private consumption over the coming year whichwill place pressure on import demand leading to a large trade deficit.Fiscal consolidation efforts through an increasing tax base will offsetfalling foreign aid following the country’s move from grant-basedfinancing to loan-based financing. Debt levels are set to rise onthe back of a low risk debt status and increasing demand for debtfinancing due to lower grant funding.
President Kagame running for a third term will spook foreign aiddonors, despite overwhelming support for the decision in a December2015 referendum, which could lead to a faster than expected declinein grants.Surging population growth, low base effects and a governmentcommitted to market-friendly structural reforms will see Rwanda’seconomy expand rapidly over the coming years. The country’sdifficult relationship with its neighbours poses the gravest threatto this forecast; a major international crisis could derail Rwanda’sdevelopment hopes.
Table Of Contents
Rwanda Country Risk Report Q2 2016 Executive Summary 5 Core Views5 Key Risks5 Chapter 1: Economic Outlook 7 SWOT Analysis 7 BMI Economic Risk Index 7 Economic Growth Outlook 8 Infrastructure Focus Will Contribute Towards Growth8 Focus on infrastructure development by the Rwandan government will continue to attract fixed investment into the country Growth will be maintained by private consumption over the coming year which will place pressure on import demand leading to a large trade deficit GDP By Expenditure Outlook 9 TABLE: GDP GROWTH FORECASTS9 TABLE: PRIVATE CONSUMPTION FORECASTS9 TABLE: GOVERNMENT CONSUMPTION FORECASTS9 Fiscal Policy And Public Debt Outlook 10 Fiscal Consolidation Will Offset Falling Donor Grants10 Fiscal consolidation efforts through an increasing tax base will offset falling foreign aid following the country's move from grant-based financing to loan-based financing TABLE: FIXED INVESTMENT FORECASTS10 TABLE: NET EXPORTS FORECASTS10 TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES11 Structural Fiscal Position 12 Chapter 2: 10-Year Forecast 15 The Rwandan Economy To 2025 15 A Bright Spark In Sub-Saharan Africa15 Rwanda has several structural strengths that will work in its favour over the coming decade, including sustainable drivers of real GDP growth, a strong commitment to reform and supportive business environment, rising productivity and services diversification We are forecasting average long-term real GDP growth of 71 % over the next 10 years TABLE: LONG-TERM MACROECONOMIC FORECASTS15 Chapter 3: Political Outlook 17 SWOT Analysis 17 BMI Political Risk Index 17 Domestic Politics 18 Kagame's Reign Will Continue Due To Public Favour18 President Kagame running for a third term will spook foreign aid donors, despite overwhelming support for the decision in a December 2015 referendum, which could lead to a faster than expected decline in grants Chapter 4:BMI Global Macro Outlook 21 Global Macro Outlook 21 Downside Risks Gather Momentum21 TABLE: GLOBAL ASSUMPTIONS21 TABLE: DEVELOPED STATES, REAL GDP GROWTH, %22 TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, % 22 TABLE: EMERGING MARKETS, REAL GDP GROWTH, %23 TABLE: MACROECONOMIC DATA and FORECASTS25