Total Impact of Tourism on the Economy of Rwanda Input-Output Approach

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Tourism has emerged as a driver not only for economic progress but also for social development in Rwanda. The tourism sector has strong linkages in the national economy, producing economic and employment benefits in related sectors, thereby promoting economic diversification and strengthening the country’s economy. This paper analyses the impacts and effects of changes in tourism demand; policies and regulations that affect tourism activity either directly or indirectly; factors beyond the direct control of the industry; public and private investment proposals; resource allocation; and policy and management of tourism development strategies. The primary objective of this study was, therefore, 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 input-output model was used to estimate the impacts and linkages of tourism in terms of output production, employment generation, labour income earnings and total value creation. The relationships between expenditure and output, and income and employment (direct and indirect) are described by multipliers. Data for analysis was sourced from multi-region input-output table (MRIO) database:  and the Rwanda Tourism Satellite Accounts (2014).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) spending. Internal tourism consumption, which triggers direct effects, is an aggregate that describes the size of direct visitor acquisition within a country of reference.  This was used as 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 year 2013/2014. Multipliers were decomposed into their various multiplier effects: initial and production effects.

This study quantifies the impact and effects of internal tourism expenditure/consumption. With total expenditure level of $286 million, the tourism sector supported about 569 thousand jobs and generated $120 million as labour income, $238 million in value addition and $522 million output. In this report, internal tourism expenditure (a portion of internal tourism consumption) was used as a basis for calculating relevant multipliers and their associated effects. Therefore, future studies can re-estimate the multipliers by considering internal tourism consumption in its entirety. Attempts should be made to integrate other components of total tourism internal demand (i.e. tourism gross fixed capital formation and tourism collective consumption) into the analysis.  More robust methodologies such as Social Accounting Matrix (SAM) and Computable General Equilibrium (CGE) models could be considered for further analysis.

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