Rwanda Country Risk Report Q4 2018
Strong public support and power centralisation will favour policy continuity and stability in Rwanda over the short term.
That said, rising tensions in East Africa will continue to threaten Rwanda's security going forward.
After rebounding in the last quarter of 2017, Rwanda's economic growth is set to continue to accelerate over the next two years, mainly due to an expansion in services and agriculture. Moreover, increased government-led investment in key infrastructure projects focussed on addressing the country's energy and transportation shortcomings will benefit the construction sector and ameliorate the country's business environment.
Economic recovery and substantial administrative reforms will increase revenues in the coming years, narrowing the budget deficit in the medium term.
That said, a strong uptick in capital expenditure driven by the new economic development strategy will see the deficit widening in 2018, and will keep the budget in deficit over our forecast period through to 2022.
The National Bank of Rwanda (BNR) will keep its policy rate unchanged throughout 2018 and 2019, ending a monetary policy easing cycle which begun in 2012. While inflationary pressures are subdued, gradually improving economic activity and better credit conditions will limit the need for any further easing.
The primary risks to Rwanda are posed by a potential deterioration of the political climate over the longer term. Kagame's prolonged stint in office, along with fuelling an already strong cult of personality associated with a personal policymaking strategy, could create a power vacuum in the case of a sudden departure.
Given historic enmity between Rwanda's Hutu and Tutsi communities, which has been in part restrained by Kagame's aggressive policies on prohibiting hate speech and criminalising genocide ideology, the president's sudden departure could spark a severe deterioration in social stability.
Regional tensions in neighboring DRC and Burundi might spill over to Rwanda, challenging the country's security environment especially if the civil unrest takes an ethnic hue.
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