Rwanda's economy to grow by 6 pct in 2014 after 2013 slump

Rwanda President, Kagame

Rwanda expects its economy to grow by 6 percent this year and 6.7 percent in 2015 after a loss of foreign aid caused it to miss its forecast target for last year, the central bank said on Tuesday.
The east African nation suffered from cuts in budgetary support by donors in 2012, after United Nations (UN) monitors accused it of backing rebels in the neighbouring Democratic Republic of Congo (DRC).
Rwandan President Paul Kagame announced in 2013 that he wanted the country's economy to grow by an average of 11.5 percent over five years. This ambitious plan now looks unlikely.
The growth rate averaged 8.2 percent from 2006 to 2012. But it fell to 4.6 percent last year, well below both the central bank's forecast of 6.6 percent and its 7.3 percent growth in 2012, the country's statistics office said earlier on Tuesday.
The central bank warned in February the country probably had missed its growth target for last year after the aid cuts caused the services sector to expand less than expected. The sector grew 4 percent, down from double-digit growth in 2012, the statistics office said.
"We had bad performance in the service sector, which is the biggest sector of our economy, and it's normally the driver of our economic performance," John Rwangombwa, the central bank governor, told a news conference.
Agriculture suffered a similar slowdown, growing 3 percent instead of the expected 6 percent. That and the shortfall in services were probably the main reasons for the economic underperformance last year, Rwangombwa said.
Manufacturing rebounded to post growth during the period.
Mark Bohlund, the senior economist for sub-Saharan Africa at IHS Global Insight in London, said the 2013 growth figure could cause IHS to revisit its 2014 growth forecast of 6.8 percent, because it was based on faster growth momentum from last year.
"This suggests that domestic demand continued to suffer despite the reinstatement of aid," said Bohlund.
Rwanda is among the economies in the region that investors have hailed for solid fundamentals, including low debt and inflation. It sold $400 million in a debut Eurobond last April.
STEADY LENDING RATE, INFLATION
Rwanda kept its lending rate unchanged at 7 percent on Tuesday, saying it expected inflation to remain within its target range of around 5 percent this year.
Urban inflation increased to 3.45 percent in the year to February from 2.43 percent in the previous month.
The bank has kept rates on hold since cutting them by 50 basis points in June.
Rwangombwa said the bank would keep rates on hold "to avoid giving signals that would end up affecting inflation", saying the current rate had worked well for the economy.
The bank expects inflation to end the quarter at around 4.3 percent and remain around 5 percent this year, "so we don't expect to see any big inflationary pressures," Rwangombwa said.
"We are happy we have been able to maintain inflation within our targets of not exceeding 5 percent, mainly with an average of 4.2 percent."