Rwanda Economic Outlook

• Growth remained robust in 2011 but a slowdown is expected in 2012 and 2013.
• The outlook depends on securing financing for the state-led investment programmes, an improved external environment and recovery in credit to theprivate sector.
• Skills mismatch and limited job growth are major causes of youth unemployment. 

In 2011 growth was driven by good harvests, an increase in exports largely due to rising commodity prices and high domestic demand driven by expanding credit to the private sector. Expansion in government spending and recovery in tourism also contributed to the growth. Gross Domestic Product (GDP) growth is expected to moderate in 2012 as programmed fiscal consolidation reduces aggregate demand and also as a result of global economic uncertainties. Macroeconomic policy in 2012 and 2013 is expected  to remain focused on promoting economic growth while maintaining stability. Fiscalpolicy will aim at achieving fiscal consolidation and a gradual withdrawal of the fiscal stimulus. Although the overall balance of payments is expected to remain in surplus in 2012 and 2013 because of the expected inflows to finance public and private investments, persistent trade deficits will remain significant challenges over the medium term.

Youth unemployment remains a major challenge, with over 42% of the young either unemployed or underemployed in the subsistence agricultural sector. The main causes of youth unemployment are skills mismatch and limited job growth. The average skills deficit is estimated at 40% and in some categories current demand exceeds supply by 60% across the public, private and not-for-profit sectors. Job creation in the non-farming sector, estimated at 74 000, is also inadequate for the approximately 200 000 young schoolleaver entering the job market annually. Policy frameworks for skills development and job creation for both urban and rural areas, and to increase gender equality, are already in place but more needs to be done to translate these policies into tangible impacts.