Rwandan economy falls into its first recession as a result of Covid-19 pandemic

The Rwandan economy is currently in its first recession as a result of the Covid-19 pandemic.

The COVID-19 pandemic has pushed the Rwandan economy into recession, with huge implications of reversing gains already made in its poverty reduction schemes.

By Johnson Uche

This was disclosed in the 16th edition of the World Bank Rwanda Economic Update, with the

country’s gross domestic product (GDP) estimated to have dropped by 0.2 percent in 2020, compared to a projected expansion of 8 percent before the COVID-19 outbreak.

According to the update report:

• “This dire economic effect has severely adverse implications for households, as thousands are facing unemployment, revenue losses and increased consumption prices are pushed into poverty.
• “The Economic Update estimates that, because of the lockdown, social distancing, and increased costs associated with the pandemic, the poverty headcount is likely to rise by 5.1 percentage points (more than 550,000 people) in 2021, with more than 80 percent of the new poor in rural areas.
• “In the absence of decisive actions, the adverse effects on education and health, have the potential to reduce long-term productivity and slow down the country’s long-term growth potential. The long closure of schools and lower household income are likely to reduce school enrollment, as many students seek employment.
• “An estimated 3.5 million students have been out of school, and statistics indicate that the share of students in total employment increased from 3.4 percent in February 2020 to 8.8 percent in August 2020.”

What they are saying

According to Calvin Djiofack, the World Bank Senior Economist:

• “The severity of the effect is due at least in part to the fact that the crisis hit where it hurt the most, travel and hospitality services, which are the sectors for which the country has invested massively in recent years through its the MICE (Meetings, International Conferences, and Events) strategy.
• “The crisis calls for the rebalancing of the growth strategy, with more emphasis on rural related activities and greater emphasis on regional integration to reduce vulnerability to international shocks.”

According to Rolande Pryce, the World Bank Country Manager for Rwanda:

• “The unprecedented impact of the crisis heightens the urgency of ensuring the availability of strong and adaptable programs and policies to mitigate poverty, and to safeguard the health, schooling, and employment of the population.
• “By further expanding the coverage of well-targeted safety net interventions and prioritizing investments in human capital, Rwanda can quickly and effectively mitigate the effects of the shock and lay the groundwork for future resilience.”

What you should know

• The Government of Rwanda had earlier initiated a swift and robust response to the pandemic, with the adoption of the Economic Recovery Plan (ERP) estimated at US$900 million over the two fiscal years 2019/20 and 2020/21.
• The recovery plan is aimed at scaling up the social safety net programs for the most vulnerable, develop key infrastructures as well as support strategic enterprises, including small and medium-sized enterprises.
• With the social safety nets programs, poverty rate has already been reduced by 1.2% point in 2020 and is expected to reduce by 1.7% points in 2021.
• According to the report, the following action plans were proposed by the Rwanda Economic Update to protect and improve human capital in Rwanda: “Accelerating deployment of COVID-19 vaccines to contain the pandemic, combating the poverty impact of the pandemic by expanding coverage of social safety nets, improving targeting accuracy to make social safety nets more cost-effective, and expanding social insurance to the informal sector, and reducing learning losses through optimization of remote education due to the COVID19 disruptions, improving skills and strengthening accountability in education”.