Analyzing Rwanda's economy drivers, challenges & currency dynamics in 2024

Rwanda's real GDP is projected to grow by 8.3 per cent in 2024, showcasing a remarkable performance driven by robust showings in the services and construction sectors, as well as a resurgence in food crop production. Gonzague Muganwa, an Economic Analyst in Rwanda, highlighted the impressive trajectory of the country's economy despite global challenges in a recent interview on CNBC Africa. In 2024, Rwanda has exhibited considerable resilience and recovery, bouncing back from the impacts of the COVID-19 pandemic that affected economies worldwide. A significant boost in food crop production, particularly during Season A, has been pivotal in stabilizing prices and containing inflation, which was a pressing concern in the preceding years. Additionally, sectors like services and construction have been consistently growing, driving the overall positive performance of the economy. The construction sector, in particular, has received substantial financing, given its critical role in creating linkages with other industries and supporting infrastructure development. Investments in areas like hospitality have further contributed to the growth of the service sector, signaling a sustained trajectory in the long term. Nevertheless, Muganwa emphasized the importance of structural changes in the economy to ensure sustainable development, especially in transitioning from the current sectoral composition. Despite the promising growth outlook, Rwanda has faced challenges in currency dynamics, with the Rwandan franc depreciating by 6.6% against the US dollar. Over the past decade, the franc has lost more than 50% of its value, primarily due to trade imbalances and external factors affecting global currencies. The reliance on imports for sectors like construction, particularly for materials like steel, has added to the pressure on the local currency. Looking ahead, the IMF projects a growth rate of 8.3% for Rwanda's real GDP in 2024, positioning the country among Africa's top performers. However, Muganwa highlighted potential risks that could derail this optimistic forecast, including internal factors like weather patterns affecting food production and external economic pressures such as conflicts in regions that could disrupt supply chains and energy prices. To maintain its growth momentum, Rwanda will need to focus on skill development to enhance productivity, as a significant portion of its workforce remains low-skilled. Continued investment in infrastructure and tourism, along with the resolution of conflicts in neighbouring countries like the eastern Congo, will also be crucial for the country's economic stability. Furthermore, Rwanda's strategic position in the continental free trade area presents opportunities for expanding market access and attracting investments. As Rwanda navigates through a complex economic landscape, resilience and adaptability will be key in mitigating risks and seizing growth prospects. With a proactive approach to addressing internal and external challenges, the country can further solidify its position as a promising economy in the region.