Recent Economic developments By Prof Kasai Ndahiriwe BNR
Recent Economic developments By Prof Kasai Ndahiriwe, BNR 20 th November 2017
OUTLINE I. Global economy II. National economic performance III. Outlook
I. GLOBAL ECONOMY In October 2017, the IMF revised up growth forecasts for the global economy to 3. 6% from 3. 5% forecast in July. GDP growth (%) in selected economies 10. 0 8. 0 6. 0 4. 0 2. 0 0. 0 Q 1 Q 1 Q 2 Q 2 Q 3 Q 3 Q 4 Q 4 2016 2017 USA (Qo. Q) 0. 8 1. 4 2. 8 1. 2 3. 1 2. 3 2. 7 Euro area (Yo. Y) 1. 7 1. 6 1. 7 1. 9 2. 0 2. 3 2. 1 2015201620172018 proj. Annual Average 2. 9 1. 5 2. 2 2. 3 2. 0 1. 8 2. 1 1. 9 China (Yo. Y) 6. 7 6. 8 6. 9 6. 7 6. 6 6. 9 6. 7 6. 8 6. 5 Source: Bloomberg & IMF, WEO July 2017 India (Yo. Y) 8. 6 7. 2 7. 5 7. 0 6. 1 5. 7 6. 6 7. 2 8. 0 7. 1 6. 7 7. 4
Recovery in Sub-Saharan Africa driven by increasing commodity prices 12. 0 SSA GDP growth (%) 10. 0 8. 0 Sub-Saharan Africa 7. 0 6. 0 5. 3 4. 3 Angola Nigeria South Africa 5. 1 3. 5 3. 4 4. 0 2. 7 1. 3 0. 0 -2. 0 -4. 0 2011 2012 Source: Bloomberg & IMF, WEO July 2017 2013 2014 2015 2016 2017 2018 Source: Bloomberg & IMF, WEO July 2017
In EAC, economic growth remained resilient in the first half of 2017… 10 9 8 7 6 5 4 3 2 1 0 8. 9 8. 5 7. 4 6. 2 5. 3 5. 7 6. 1 4. 7 5. 0 2016 Q 1 5. 6 5. 7 5. 3 5. 4 4. 5 4. 2 4. 0 3. 3 2. 8 2. 9 1. 7 Rwanda 2016 Q 2 6. 9 6. 8 2. 3 Kenya 7. 8 2016 Q 3 Tanzania 2016 Q 4 2017 Q 1 Uganda 2017 Q 2
II. NATIONAL ECONOMIC PERFORMANCE Main messages from the recent developments § The Rwandan economic performance improved in 2017 Q 2 11. 0 9. 0 AGRICULTURE, FORESTRY & FISHING INDUSTRY SERVICES Taxes less subsidies on products 8. 9 7. 5 7. 0 5. 4 5. 0 4. 0 2. 4 3. 0 1. 7 1. 0 -1. 0 2016 Q 1 § 2016 Q 2 2016 Q 3 Expected good performance in 2017 Q 3 § Increasing turnovers of industry and services sectors § Increase in commodity prices § Agriculture season B good harvest 2016 Q 4 2017 Q 1 2017 Q 2
Leading indicators (CIEA) shows a continued improvement of economic activities • Good performance: 2017 Q 3>2017 Q 2>2017 Q 1 • But lower on average compared to 2016 19. 0 10. 0 8. 9 17. 0 18. 1 9. 0 7. 5 8. 0 15. 0 7. 0 14. 6 13. 0 5. 4 6. 0 13. 2 12. 4 11. 0 4. 0 5. 0 4. 0 RCIEA 9. 0 10. 3 2. 4 RGD 3. 0 1. 7 7. 0 6. 9 7. 2 Q 4 Q 1 2. 0 1. 0 5. 0 - Q 1 Q 2 Q 3 2016 Q 2 2017 Q 3 CIEA 2016 2017 Q 1 18. 0 7. 1 Q 2 14. 6 10. 3 Q 3 12. 4 13. 2 Jan. -Sep. 14. 9 10. 3
II. NATIONAL ECONOMIC PERFORMANCE: ECONOMIC ACTIVITIES IN 2017 B. Turnovers of industry and services: +14. 6% from +11. 8% Jan-Aug; +12. 1% from 14. 3% Jul-Aug % change 2016 Q 3 2017 Q 3 Jan. -Aug (2 m) 2016 Total turnovers Jan. -Aug 2017 14. 3 12. 1 11. 8 14. 6 Industries 25. 0 -1. 7 12. 7 7. 6 Mining & Quarrying -15. 0 26. 8 -31. 6 14. 1 Manufacturing Energy Sector Construction Services 10. 3 61. 2 54. 5 10. 6 14. 6 11. 5 -32. 6 17. 3 13. 2 64. 6 11. 6 17. 1 11. 7 -9. 2 17. 1 8. 9 30. 8 7. 3 24. 5 Petroleum distributors 18. 2 0. 2 14. 0 19. 7 Transport and Storage 15. 7 21. 6 18. 3 16. 4 Hotels and Restaurants 16. 6 -4. 2 16. 2 0. 4 9. 5 10. 0 10. 8 7. 4 Information and Comm. -3. 7 0. 3 13. 6 -1. 5 Financial & insurance 14. 4 13. 1 25. 7 10. 9 Banks 12. 8 10. 2 13. 2 10. 9 Real Estate Activities 40. 1 -43. 7 12. 8 -17. 5 Wholesale and Retail trade Hotels • Industry sector ‘s good performance led: – Mining supported by increase in prices: • • Cassiterite; +18. 6% Wolfram: + 10. 7% – Good developments in Manufacturing: • • Increasing cement production Industrial products imports: +19. 8% from 11. 5% – Energy sector still performing well due to recent new plants • Services sector’s good performance led: – Trade; – Petroleum companies • Following increase in pump prices • Increase in re-exports (+43. 7% from +23. 5%) – Transport supported by • Rwandair good performance following new aircraft & new destination (+60. 6%) – Banks
Trade balance developments Ø Trade deficit reduced by 22. 6%, from USD 1302. 10 million to USD 1007. 0 million Ø Jan – September 2017 compared to the same period of 2016 • Formal Exports +47. 0% compared to 2. 3% • Formal Imports -5. 4% compared to -0. 1% • Exports/Imports coverage from 24. 8% to 38. 6%. 2015 2016 Jan-Sept. 2017 Formal exports 558. 7 598. 7 430. 71 633. 01 % change -6. 85 7. 16 2. 3 47. 0 2311. 2 2248. 5 1733. 46 1640. 03 -3. 17 -2. 71 -1752. 5 -1649. 8 -0. 1 -1302. 7 -5. 4 -1007. 0 24. 2 26. 6 24. 8 38. 6 Formal imports % change Trade deficit Imports cover rate
Ø Traditional Exports ► Value Share: 31. 0% --- volume Share: 9. 3% Ø Other Exports ► Value Share: 35. 3% --- volume Share: 39. 6% Ø Re-Exports ► Value Share: 33. 7 % --- volume Share: 51. 1% Exports: % share Exports FOB in millions USD 700. 0 600. 0 500. 0 400. 0 300. 0 20. 0 10. 0 2014 2015 Traditional exports 2016 Jan-Sept. 2016 2017 Re-exports Other export
Ø Ø Consumer Goods ► Value Share: 33. 5 % --- volume Share: 36. 9% Capital Goods ► Value Share: 28. 7 % --- volume Share: 3. 2 % Intermediary Goods ► Value Share: 26. 6 % --- volume Share: 44. 3% Energy and Lubricants ► Value Share: 11. 3% --- volume Share: 15. 7 % Imports CIF in millions USD Imports % share 40 3000. 00 35 2500. 00 30 2000. 00 25 1500. 00 20 1000. 00 15 500. 00 10 0. 00 5 2013 2014 2015 2016 Jan-Aug 16 17 Consumer goods Capital goods Intermediary goods Enery and lubricants 0 2013 2014 2015 Consumer goods 2016 Jan-Aug 17 Capital goods Intermediary goods Enery and lubricants
Easing exchange rate pressures… • Pressure on exchange rate continued to ease with 2. 63% against USD on 17 th Nov due to: Ø Reduction in import bill; Ø Reduction in demand for dollars by big companies like Rwand. Air; Ø Improved export receipts in line with recovery in international commodity prices; Depreciation of Frw against Usd 8. 4 8. 0 9. 0 8. 0 7. 0 6. 0 5. 0 4. 0 3. 0 2. 0 1. 0 0. 0 6. 1 2. 0 0. 9 0. 2 Jan 3. 5 2. 8 0. 5 Feb 0. 8 Mar 1. 0 0. 9 Apr May 2016 • 4. 8 4. 0 1. 3 Jun 1. 5 Jul 1. 8 Aug 2. 2 Sep 2017 Expected depreciation of FRW(2017): 3% maximum 12
INFLATION DEVELOPMENTS Headline and core inflation have eased… • • Headline: 7. 7% in 2017 Q 1, 6. 2% in 2017 Q 2, 3. 5% in 2017 Q 3, 3. 6% in Oct. Core: 5. 5% in 2017 Q 1, 4. 6% in 2017 Q 2, 3. 1% in 2017 Q 3 and 2. 9% in Oct Headline Core 5% Objective 8% Ceiling 2% Lower band Oct-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 Mar-17 Feb-17 Jan-17 Dec-16 Nov-16 Oct-16 Sep-16 Aug-16 Jul-16 Jun-16 May-16 Apr-16 Mar-16 Feb-16 Jan-16 Dec-15 Nov-15 Oct-15 9 8 7 6 5 4 3 2 1 0
Monetary policy stance: overview • BNR maintained an accommodative monetary policy stance: v The policy rate was reviewed down twice since 2016 from 6. 5% to 6. 25% in Dec 2016 and to 6% in June 2017. • BNR aimed to: v Encourage banks to continue supporting the financing of the economy; v Improve banks liquidity. 14
I. Monetary developments Outcome of the monetary policy stance… § M 3 growth increased to 9. 6% in September 2017 from 7. 6% in Dec 2016 v Slowdown in economic activities Contribution to M 3 growth in % 40. 0 30. 0 20. 0 10. 0 14. 1 2012 15. 6 2013 21. 1 19. 0 2014 2015 -10. 0 -20. 0 NFA NDA M 3 7. 6 9. 6 2016 Sep 17/Dec 16
Monetary policy stance: hindrances Slowdown in NAL and stock of CPS due to: v Increase in NPLs ratio: 8. 2% by end Sept. 17 from 7. 5% by end Dec. 16; v Lower demand of loans as result of subdued economic activities. 45. 0 40. 0 35. 0 39. 0 34. 8 38. 2 30. 0 25. 0 20. 0 19. 6 15. 0 10. 0 11. 1 5. 0 5. 3 0. 0 2012 13. 7 9. 1 6. 3 2014 2015 New authorized loans growth in % 2016 12. 1 9. 6 9. 3 5. 7 Sep 16/Dec 15 Sep 17/Dec 16 CPS stock growth in % 16
Interest rate developments… • Due to improved liquidity management, money market interest rates have been recently declining and remaining close to the KRR. 12. 0 10. 0 8. 0 6. 0 4. 0 2. 0 -1 Ap 5 r-1 M 5 ay -1 Ju 5 n 15 Ju l-1 Au 5 g 1 Se 5 p 1 O 5 ct -1 D 5 ec -1 Ja 5 n 1 Fe 6 b 1 M 6 ar -1 Ap 6 r-1 M 6 ay -1 Ju 6 n 16 Ju l-1 Au 6 g 1 Se 6 p 1 O 6 ct -1 N 6 ov -1 D 6 ec -1 Ja 6 n 1 Fe 7 b 1 M 7 ar -1 Ap 7 r-1 M 7 ay -1 Ju 7 n 17 Ju l-1 Au 7 g 1 Se 7 p 17 ar M b- 15 15 n- Fe Ja D ec - 14 0. 0 Repo_rate KRR Interbank_rate T-brate_28 days W. T-bills_rate Market interest rates (% average) 2012 2013 2014 2015 2016 Lending 16. 70 17. 32 17. 26 17. 33 Deposit Spread 8. 85 7. 85 9. 93 7. 39 8. 24 9. 02 8. 24 9. 09 2017 July Aug Sep Q 1 Q 2 17. 29 17. 03 17. 11 17. 60 17. 33 7. 91 9. 38 7. 48 9. 55 8. 11 9. 00 7. 66 9. 94 7. 67 9. 63 7. 86 9. 47
I. Monetary developments Liquidity conditions developments q Banks’ most liquid assets (FRW billion, unless otherwise indicated) § Between December 16 and September 17: Total most liquid assets: +15. 0 % vs -24. 3%; § Overall improvement was mainly caused by less demand on foreign exchange market due to good performance in external sector.
Money demand Currency in circulation ratio declined since 2016 due to: Ø Ongoing modernization of payment systems Ø Slowdown in economic activities. CIC y-o-y changes CIC/M 3 (RHS) 25% 14% 20% 12% 10% 15% 8% 10% 6% 5% 0% -5% 4% Jan- May- Sep- Jan- May- Sep- Jan- May- Sep 12 12 12 13 13 13 14 14 14 15 15 15 16 16 16 17 17 17 2% 0%
Monetary developments: Interbank market The interbank market remained active in 2017:
ECONOMIC OUTLOOK • Real GDP growth to improve – Good agricultural production due to good weather improvement in food supply – Improvement in services and industry sectors rising trend of CIEA and turnovers – Improvement in Credit to the private sector • Exchange rate pressures & International oil prices to remain low • Aggregate demand & inflation to remain subdued • Monetary policy likely to remain accommodative
THANK YOU
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