Rwanda’s central bank says economic growth to reduce to 6.3% in 2016

Rwanda’s central bank expects the economy to slow to 6.3 percent this year from an estimated 7 percent in 2015 due to the effects of El Nino rains on its important agricultural sector.

“Agriculture has a big hand in that slight reduction from 7 percent to 6.3 percent,” Governor John Rwangombwa told a news conference on Thursday.

According to him, agriculture which is one of the main drivers of the economy is growing at 5.1 percent this year compared with a projected 5.5 percent last year. The services sector is, however, expected to expand to 7.1 percent this year, down from 7.3 percent growth in the first three quarters of last year alone.

The Rwandan franc has also been under pressure this year, losing 1.08 percent of its value in the first weeks of the year. Last year wasn’t any better, as the franc depreciated by 7.1 percent against the dollar, the biggest drop since 2010.

Local reports say Rwanda’s economic performance last year was affected by an unanticipated external shock to the country’s main exports, especially minerals. A sharp decline in demand, hence prices, resulted in huge loss of export receipts and foreign reserves. Deterioration of the current account in 2015 is expected to continue this year. However, Rwanda will be able to maintain an inflation rate of 4.5 – 5.5 percent range during the year.