Rwanda flag Rwanda: Economic and Political Overview

The economic context of Rwanda

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Rwanda registered a good economic performance over the last years, and thanks to investments in education and infrastructure, it reached the Millennium development goals. In 2021, the economy started to show signs of recovery from the recession brought on by the COVID-19 pandemic, with GDP growing 5.1%, thanks to the service sector and the measures taken to fight back the coronavirus. Growth is expected to continue in 2022 and 2023, when GDP should grow by 7% and 8.1%, respectively.

In 2021, activity recovered strongly from the recession brought on by the pandemic. Inflation significantly reduced to 2.4%, but it is expected to increase to 4.9% in 2022 and 5.8% in 2023. The debt-to-GDP ratio increased to 74.8% in 2021, and it is expected to continue to rise in the coming years, reaching 78.2% in 2022 and 80.9% in 2023. However, the overall deficit should remain stable at 1.35% in 2022 and 1.34% in 2023, against 1.4% in 2021. With over 70% of the population employed in agriculture, household incomes are expected to continue to benefit from the favourable prices of export crops in 2022, which should result in higher household expenditure. In 2021, the government continued implementing a series of fiscal measures put in place to overcome the challenges related to the COVID-19 crisis, which have been effective. Furthermore, the public investment, through the national strategic transformation plan (NST), targeted infrastructures related to trade such as the construction of the airport of Bugesera, to help the restart of the economy. The NST focuses on economic, social and governance transformation, according to the aspirations of the plan Vision 2050. As part of the latter, the government is developing new medium-term development strategies aimed at turning the country in a country with intermediate high income status before 2035, while the “Made in Rwanda” program aims to promote local production in order to reduce imports.

Despite the progress made, Rwanda remains a very poor country, where around 40% of the population lives below the national poverty line. In 2021, the unemployment rate in the country was at 23.5%, according to the government's Labour Force Survey. Unemployment in Rwanda is much higher among women (26.7%) then men (19.9%).

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 10.3610.3310.4011.0411.94
GDP (Constant Prices, Annual % Change) 9.5e-3.4e5.17.08.1
GDP per Capita (USD) 835e816e802833881
General Government Gross Debt (in % of GDP) 50.260.174.878.280.9
Inflation Rate (%) 2.47.7e0.88.07.0
Current Account (billions USD) -1.25e-1.27e-1.40-1.35-1.34
Current Account (in % of GDP) -12.1-12.2-13.4-12.2-11.2

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

The Rwandan economy depends on subsistence economy, tea and coffee exports, and tourism. The mining sector is also a pillar of the economy: the country is one of the largest producers of tantalum, used, among other things, in the construction of mobile phones. Agriculture is the main economic activity of the Rwandan people, directly providing employment for 62.2% of the total population (World Bank). The sector accounts for 26.2% of GDP and accounts for around 80% of foreign income from exports of coffee, tea, hides and skins, horticulture and pyrethrum (chrysanthemum-based insecticide). About 61% of the Rwandan soil is suitable for agriculture because the soils are fertile, but food production often does not meet demand, requiring imports. Although the inital stages of the pandemic had adverse effects on the performance of the Rwandan agriculture sector, agriculture showed a steady recovery in 2021.

The industrial sector is strongly linked to the processing of primary agricultural products. It represents 19.3% of GDP and 8.6% of employment. It is estimated that almost 70% of industries in Rwanda are located in Kigali, with little activity in the urban centers of the hinterland. The government is committed to gradually privatizing the productive sector and promoting the development of the private sector.

The tertiary sector contributes around 46.4% of GDP and employs 29% of the total workforce. According to the government's "Vision 2020" plan, services could become the main driver of the Rwandan economy. The financial sector is made up of seven commercial banks and one development bank; the “Financial Sector Development Program” aims to deepen financial services and increase their reach among Rwandan citizens. In addition, Rwanda seeks to support the growth of the tourism industry and to become a regional leader in information and communication technologies. Tourism has become an important source of foreign exchange (around USD 300 million), in particular thanks to the increase in the number of international conferences, and should continue to grow thanks to significant investments in infrastructure, such as the construction project of Bugesera Airport. The expansion of RwandAir, the national airline, with the opening of new routes, should accompany the development of the sector. Nevertheless, the COVID-19 pandemic has greatly impeded these dynamics, with travel and hospitality services being hit the hardest. However, as restrictions lifted and vaccination rates rose, the services sector as a whole began to show signs of recovery.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 62.3 8.6 29.1
Value Added (in % of GDP) 26.3 19.3 46.4
Value Added (Annual % Change) 0.9 -4.2 -5.5

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
68,3/100
World Rank:
47
Regional Rank:
2

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

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Latest Update: September 2022

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