Rwanda has revised upwards inflation projections for 2025 with overall inflation estimated at 5.8 per cent for 2025 as food inflation is tipped to soar owing to climate change which may impact harvest and thus taking up food inflation. CNBC Africa’s Aby Agina spoke to Thierry Kalisa, Chief Economist, National Bank of Rwanda for more.
Rwanda has revised upwards inflation projections for 2025 with overall inflation estimated at 5.8 per cent for the year as food inflation is tipped to soar owing to climate change which may impact harvest and thus taking up food inflation. Well, I spoke to Thierry Kalisa, the Chief Economist at the Central Bank of Rwanda and here is more. Thierry Kalisa, Chief Economist, National Bank of Rwanda for more. We still see slowdown in economic growth globally. This is a continuation of the previous efforts by the central banks globally to reduce inflation. Therefore, they have increased their rates. Inflation globally is then reducing, that's a good thing, and commodity prices are also reducing and continuing to reduce in the medium term. The implication for us, our inflation is still projected to be within the bound of two to eight per cent. We adjusted our projections. We have slightly lower projections for 2024, overall is 4.6 per cent, and slightly higher projections for 2025 with an overall average of 5.8 per cent. The reason why we have revised our projections for 2025 slightly is because of food inflation that we see at the beginning of next year or even end of this year. We see some pressures on some food items because there have been delays in rainfall at the beginning of this season, during the planting season. Usually, this affects the volume of production of food products that we can get in this season. Therefore, we see some slight pressures on prices. But overall, if you put all the numbers together, still 5.8 per cent is within our bounds. That's the reason why the MPC decided for the moment to pause. You know the past two rounds, MPC reduced the rates. This time around, MPC decided to maintain the rate at 6.5 per cent, looking at what will happen in the coming months. One risk, even if we are factoring in a lot of things, including these possible pressures on food prices, one risk that we are seeing is still what's happening globally, the geopolitical fragmentation, the tensions around the world globally. We see in the news what is happening in Russia, Ukraine, in the Middle East, etc. For the moment, on global prices, there's no impact. But there's a risk that maybe if things get worse, there could be an impact on international commodity prices. So that's the main risk we are seeing. But for the moment, our inflation remains within the bounds, and that's why the rate has been maintained. You've already raised some caution when it comes to the agricultural performance for 2025. What does this mean going forward for the economy? The economy is performing well. This year, 2024, we've had very good growth of all sectors actually. The first two quarters, we saw the numbers released by NISR, 9.8 per cent economic growth, GDP growth for the first six months. We have other indicators we follow for Q3, and even some indication of Q4, which makes us think that actually it will remain high. The overall projection for the year has been revised up. You know the Ministry of Finance has published that or mentioned that. You also heard the IMF talking about a number of 8.3 per cent for the year. So right now, that's the new projections. But we may even exceed that. On the side of economic growth, we saw sectors in services driving growth, like trade services, financial services, ICT, hotels and restaurants, especially the first six months, and tourism-related services. Even if in Q4 we expect a slight impact of the Marburg virus, because some conferences have been delayed or postponed to another date. But overall, the impact is not that big on the overall sector. Industry sector, construction is performing very well. Also manufacturing sector. For agriculture, as I said, we had a very, very good agriculture season for the first six months of this year. Then a moderate one for the season B, so the second season of the year. And then a moderate one for the season C, so the second season of the year, which is for 2024. As I said, for 2025, we may have challenges with the new season A. But overall, industry sector and services sector are performing well. Therefore, we have in the medium term, 2025, 2026, projections close to 7 per cent.
Theme: Economic Outlook and Inflation Projections in Rwanda for 2025
Rwanda's economic landscape for the year 2025 is facing adjustments in its inflation projections, with the National Bank of Rwanda revising its expectations to 5.8 per cent. The Chief Economist, Thierry Kalisa, highlighted the impact of global economic slowdown and efforts to curb inflation rates worldwide. Despite the positive trend of decreasing inflation and commodity prices globally, Rwanda is bracing for a potential rise in food inflation due to climate change effects on harvests. Delayed rainfall at the onset of the planting season has led to concerns about reduced food production and subsequent price pressures. However, the overall inflation forecast remains within the two to eight per cent range. The Monetary Policy Committee (MPC) decided to maintain the interest rate at 6.5 per cent, anticipating future developments. Kalisa also pointed out geopolitical risks, especially tensions in regions like Russia, Ukraine, and the Middle East, which could impact international commodity prices. Despite these challenges, Rwanda's economy has shown resilience in 2024, with robust growth across various sectors. Services, including trade, finance, ICT, and tourism-related services, have been significant drivers of economic expansion. The industry sector, particularly construction and manufacturing, has also performed well. While the agricultural sector experienced a mix of exceptional and moderate seasons in 2024, concerns loom for the 2025 season due to climate-related uncertainties. Nonetheless, the medium-term outlook projects steady economic growth rates close to 7 per cent for 2025 and 2026.
"We have in the medium term, 2025, 2026, projections close to 7 per cent."
Rwanda, inflation, 2025, climate change, economic growth, National Bank of Rwanda, Thierry Kalisa, MPC, interest rate, commodity prices, geopolitical risks, services sector, industry sector, agriculture