Martin Dokoupil
November 19, 2013
(Blank Headline Received)
Rwandan youth attend a woodwork class at Iwawa Island, 193km (116 miles) west of Rwanda's capital Kigali, June 26, 2010. REUTERS/James Akena

By Martin Dokoupil

ABU DHABI (Reuters) - Rwanda's economic growth is likely to slow to 6.6 percent this year, more than the government expects, but it should rebound again in 2014, its governor said on Monday.

"Currently we have a projection of about 6.6 percent (real GDP growth) this year. It is a big slowdown from last year's around 8 percent because of unfavourable weather conditions, the global economic problems," John Rwangombwa told Reuters.

The central bank's forecast is in line with the International Monetary Fund, which cut its 2013 growth projection for the East African country's $7.7 billion economy in October. The government's forecast is 7.5 percent.

"Next year, it will be maybe around 7.4 percent. The service industry performed well this year and we expect it to pick up again next year and construction may go higher as well," he said on the sidelines of the World Economic Forum in the United Arab Emirates.

That is more conservative than the finance ministry's forecast of an over 8 percent growth in 2014. Rwanda's growth clip averaged 8.2 percent in 2006-2012.

Rwangombwa also said the country was not considering another international bond issue so far for 2014 as the market conditions are not as favourable as in April.

"For now we have not decided on going back to the market. It will depend on the projects we need financing for and it will also depend on the conditions on the market," he said.

"We will keep it (bonds) as an option for financing but we won't have it as a plan to do it annually as such only for the sake of it. We will only do it when there are specific projects," he said.

Rwanda launched a $400 million international bond in April at the height of demand for high-yielding bonds, drawing subscriptions of more than 8 times the issue size.


The central bank kept its key repo rate at 7.0 percent in September, citing low inflation and solid economic performance, following a 50 basis-point cut in June, which was aimed to spur bank lending.

"At the moment it is still very low (the impact of the repo rate reduction on bank lending) but I would expect by the end of the year, the beginning of next year, maybe we will see the difference. It takes time," Rwangombwa said.

"We have a stable economy, a currency that is depreciating normally so we are satisfied with the impact of the monetary policy on the economic performance," he said.

The central bank will review its policy settings again in December.

The Rwandan franc has fallen some 6.4 percent this year, hitting record lows beyond 668 per dollar.

Bank lending growth to the private sector should average 12 percent this year, much less than the central bank's forecast of around 18 percent, the governor said, adding it was expected to pick up the speed again in 2014.

Inflation in Rwanda will most likely end this year below 6 percent, while the central bank's medium term projection is price growth of around 5 percent, Rwangombwa said.

Consumer prices in Rwanda's urban areas rose 5.1 percent in the year to October, holding steady at the same level as in the first nine months, data showed. The IMF forecast in October that inflation will accelerate to 6.8 percent in 2014 from 5.7 percent expected this year.