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Nairobi — Rwanda's economy is expected to grow at 7.2 per cent this year, after recovering from the external and domestic shocks of the past two years.

After registering a strong performance in 2008, with gross domestic product growth of 11.6 per cent, last year's low economic activity slowed down growth to 6 per cent.

In the middle of 2009, the dual effects of the global recession and the tight domestic liquidity conditions impacted negatively on GDP growth, with the country's industrial and service sector most severely affected.

Industrial sector growth declined from 15 per cent in 2008 to 1 per cent in 2009. Mining and quarrying sub-sectors suffered from the decline in world demand and drop in international prices. Activity in the construction sub-sector suffered from a reduction in bank credit facilities due to lower liquidity and more non-performing loans.

The services sector grew by only 6 per cent in 2009 compared with 15 per cent in 2008.But according to the country's central bank, National Bank of Rwanda (BNR), with improving liquidity conditions in the banking system, economic fundamentals are showing positive results in terms of economic recovery from the moderate performance in 2009.

Releasing the central bank's quarterly Monetary Policy Committee report in November, BNR Governor Francois Kanimba underscored that the economy has benefited from "continuing low and quite stable" inflation and generally stable local currency.

"We expect the low single digit inflation figure to be maintained for the rest of the year," he said, adding that the low inflationary pressure will enhance economic growth.

On an annual basis, overall inflation dropped from a record high of 22.3 per cent in 2008, to 5.7 per cent in December 2009, dropping further to 0.2 per cent in October this year. This is well below the Central Bank's target of 7 per cent for the whole year.

The economy has also been largely boosted by the agricultural sector, the backbone of the Rwandan economy, which has maintained strong performance in the past three years, recording an increase of 8.2 per cent compared with 2009 due to sustained government investment in the sector.

Agricultural sector

Specifically, the sector continues to benefit from the large investments in fertilisers, improved seeds and extension services under the government's Crops Intensification Programme, complemented by favourable climatic conditions.

The economy has also benefited from good performances recorded in non- agricultural activities as indicated by the Composite Indicator of Economic Activities (CIEA) following a moderate performance in 2009.

The CIEA increased by 5.6 per cent in September 2010 against 8.8 per cent recorded in June, 3.3 per cent in March 2010 and -0.7per cent in December 2009 respectively on annual basis.

During the first nine months of 2010, total turnovers of formal companies in the industry and service sectors rose by 23.6 per cent, against 6.5 per cent in the corresponding period of the previous year, boosted by improvement in credit conditions, global demand and low inflationary pressures.

However, according to a November report by the International Monetary Fund mission to Rwanda, the country's real GDP growth is expected to reach about 6 per cent this year after slowing down to 4.1 per cent in 2009According to the IMF, the risks to Rwanda's economic outlook include slower pick-up in external demand and domestic credit, as well as uncertainties about global food and fuel prices.
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