Impact of tourism on the economy of Rwanda: social accounting matrix (sam) analysis

Abstract

The primary objective of this study was to evaluate the economic impact of tourism and assess the strength of tourism inter-industry linkages in Rwanda’s economy for the year 2013/2014. The SAM model was used to estimate the impacts and linkages of tourism in terms of output production, employment generation, labor income earnings and total value creation. The economic models identified and quantified the linkages between different sectors of the economy. The relationships between expenditure and output, and income and employment (direct and indirect) were described by multipliers. Data for analysis was sourced from EORA multi-region input-output table (MRIO) database: http://www.worldmrio.com/.  All impacts have a starting point in the economy, defined as the direct effect. The direct effect sets off iterations of indirect (inter-industry production). Total tourism expenditure/consumption, which triggers direct effects, consists of internal tourism consumption. Internal tourism consumption is an aggregate that describes the size of direct visitor acquisition within a country of reference. Therefore, internal tourism expenditure (a portion of internal tourism consumption) was used as a basis for calculating tourism multipliers and their associated effects.  There are several different types of multipliers depending on the secondary effects included and the measure of economic activity used. The common multipliers computed were associated with output, income, value addition and employment in the economy for the years 2013/2014. Multipliers were decomposed into their various multiplier effects: initial and production effects. About $286 million worth of internal tourism expenditure/consumption in the economy created 72,000 jobs (13% of economy-wide employment) and generated $195 million in labour income (6.4% of national labour income), $381 million in total value addition (6.8% of national total value) and $803 million in output (7.3% of national output).This study analyzed the effects of changes in tourism expenditure/consumption, effects of policies and regulations that affect tourism activity either directly or indirectly, resource allocation, policy and management of tourism development strategies. Internal tourism expenditure (a portion of internal tourism consumption) was used as a basis for calculating relevant multipliers and associated effects. Future studies should estimate the multipliers by considering internal tourism consumption in its entirety and a more robust methodology such as Computable General Equilibrium (CGE) models be considered for further analysis.