Yoichiro IshiharaSenior EconomistIPAR 5th Annual Research ConferenceKigali, Rwanda, Mar 2016

Macroeconomic Resilience in Rwanda

In this presentation, I will

2

conceptualize risk, vulnerability and resilience.

attempt to estimate Rwanda’s resilience using the concept.

argue Rwanda’s resilience based on the estimate.

Risk, Vulnerability and ResilienceConceptual Framework (1)

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Riskof a country being adversely affected by external shocks

Exposureof a country to external shocks arising from intrinsic features of the economy

Copying AbilityEnabling the country to withstand or bounce back from external shocks

Vulnerability Resilience

Inherent or Permanentand not subject to policy or governance Economic openness Export concentration Dependence on

strategic imports

Nurturedand subject to policy or governance Good governance Sound

macroeconomic management

Market efficiency Social cohesion

= -

Source: Briguglio, L, Cordina, G, and Vella, S (2008)

Risk, Vulnerability and ResilienceConceptual Framework (2)

4Source: Adopted from Briguglio, L, Cordina, G, and Vella, S (2008)

I. Worst Case

II. Self-Made

III. Prodigal-Son

IV. Best-Case

High Vulnerability

Low Vulnerabilit

y

High Resilience

Low Resilience

Risk, Vulnerability and ResilienceSubjects and Indicators (3)

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Subjects Indicators

Vulnerability Economic openness Export

concentration Dependence on

strategic imports

Trade (%GDP) Concentration index Energy, food and industrial

supplies imports (% GDP)

Resilience Good governance Sound

macroeconomic management

Market efficiency Social cohesion

Rule of law Fiscal deficit, inflation and

unemployment, and external debt

Regulation of credit and labor Adult literacy and life

expectancy

Source: Modified from Briguglio, L, Cordina, G, and Vella, S (2008)

These indicators are standardized and aggregated with a non-weighted basis

Application to Rwanda’s AssessmentConstructing Indicators

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Indicator Year Value Standardize Score

Vulnerability Trade (% GDP) 2010-14 44.4% -0.98Exp concentration 2010-14 0.4 0.58

Resilience(1) Macroeconomic Fiscal balance (%

GDP)2008-13 -1.4% 0.17

Unemployment 2010-14 0.6% 1.32Inflation 2010-14 4.7% -0.05External debt (% GDP)

2010-14 20.4% 0.87

(2) Microeconomic Credit regulation 2013 8.5 0.01Labor market 2013 8.4 1.39

(3) Governance Rule of Law 2014 0.1 -0.01(4) Social dev Adult literacy (%) 2010-14 67.1% -0.94

Life expectancy 62.0 years -0.95

Application to Rwanda’s AssessmentRwanda falls into “Best-Case”

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-3 -2 -1 0 1 2 3 4 5 6-15

-10

-5

0

5

10

15

Singapore

High Vulnerability

High Resilience

Rwanda

Application to Rwanda’s AssessmentRelationship with the stage of development

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100 1,000 10,000 100,000 1,000,000 -3

-2

-1

0

1

2

3

4

5

6

High Vulnerability

GDP per capita

Weak relationship between GDP per capita and vulnerability

100 1,000 10,000 100,000 1,000,000 -15

-10

-5

0

5

10

High Resilience

GDP per capita

Strong relationship between GDP per capita and resilience

Rwanda

Rwanda

Implication to Rwanda’s DevelopmentRoom to reducing vulnerability and strengthen

resilience

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16-4%-2%0%2%4%6%8%

10%12%14%16%

8.4%8.5%

13.2%

2.2%

7.5%9.4%9.2%

7.6%

11.2%

6.3%7.3%7.9%8.8%

4.7%7.0%6.9%

Agriculture Industry Services GDP

Implication to Rwanda’s DevelopmentTowards lower vulnerability

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2004 2009 2014 20150%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

33%19%

10% 11%

22%

25%

9%13%

32%

29%

34% 21%

6%21%

20%23%

7% 6%

28% 32%

Coffee Tea MineralsOthers Reexports

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150%

5%

10%

15%

20%

25%

30%

35%

40%

5% 5% 5% 5% 6% 4% 4% 6% 7% 8% 8% 7%

15% 16% 18% 20%

24%23%

25%

29% 29%30% 30%

29%

Exports Imports

Slow progress on export diversification (share in goods exports)

Imports have lead increase in the exposure to the rest of the world (% GDP)

Implication to Rwanda’s DevelopmentTowards strengthening resilience

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Rule of Law (# from Worldwide Governance Indicators)

Macroeconomic stability has been attained recently

1996

1998

2000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

-2.0

-1.5

-1.0

-0.5

0.0

0.5

Rwanda Kenya Tanzania Uganda

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

-5

0

5

10

15

20

25

0

20

40

60

80

100

120

140

Inflation (left)External debt (% GDP, right)

Thank you very much

For further informationWorld Bank’s Rwanda country page (http://www.worldbank.org/en/country/rwanda) Facebook (https://www.facebook.com/search/top/?q=world%20bank%20rwanda)