Africa Market Update -December 2014

MARKET UPDATE – AFRICA | November 2014
-1.1 %
Rwanda franc
month-on-month
depreciation
+4.3 %
Rwanda franc yearon-year
depreciation
Government Expenditure
Reports indicate that the government is
intent upon scaling up expenditure with a
view to accelerating the economy’s recovery.
Government Expenditure vs GDP
Growth
DEBT MARKET UPDATE
Yields in the T-Bill market have resumed a
downtrend in November 2014. We view this,
primarily, as a consequence of a favourable
outlook on inflation trends by investors.
Inflation has been on a steady downtrend
for six months standing at 2.2% in October
2014. Investors are likely expecting the
trend to persist driven by declining global oil
prices that will ease the burden of imported
inflation.
Inflation
Source: BMI 2014, StratLink Africa
This is bound to be a crucial catalyst for
economic growth given Rwanda’s reliance
on government expenditure as an engine
of growth. Between 2003 and 2013, government
expenditure grew by an average
11.2% while GDP growth averaged 7.3% 7 .
Source: National Bureau of Statistics, StratLink Africa
Bank of Rwanda targets keeping inflation
below 5.0% 8 , but does not specify bands
within which it is expected to trend. Despite
a favourable outlook, we are wary of this
pace of disinflation, which if sustained could
expose the economy to the risk of deflation.
T-Bill Yields’ Trend
Source: Bank of Rwanda, StratLink Africa
7 Business Monitor International 2014 8 Bank of Rwanda Monetary Policy Outlook Q42014
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