The economy is forecast to grow at a slower rate of 3.5 percent this year from a revised eight percent in 2011 due to lower out put from the mining sector, particularly the diamond industry, President Ian Khama has said.In his State of the Nation Address, the president said that lower-than-expected output from the mining sector would drag growth below the 4.4 percent rate projected in the February budget.
Khama said that the diamond market has been adversely affected by the weaker global economic activities translating to a slower economic growth rate for Botswana, which is heavily dependent on mining activities for revenues and foreign exchange."The economy is seen growing by 3.5 percent this year before rising by five percent in 2013. Output from the mining sector will be heavily curtailed by the weak diamond market which is currently suppressed due to the global economic slowdown," said Khama.
"During 2012 diamond sales forecast for end of the year is expected to reduce significantly. Carats sales and revenue are forecast to reduce by 13 percent and 19 percent respectively," he added. Government's projection is slightly lower than the IMF growth forecast.
The October edition of IMF's World Economic Outlook (WEO) projects that Botswana's real Gross Domestic Product (GDP) will grow by 3.8 percent this year, up from the 3.3 percent forecast in the April edition of the same study.The fall in mining activity is underpinned by the stagnant diamond production which has been following weakening market trends, as high stock levels, liquidity constraints, a weaker rupee in India and softer demand from China have contributed to lower global demand.
Debswana plans to produce 24 million carats this year from the 22.89 million carats in 2011, but it is unlikely to reach the target largely due to the latest round of soft demand from the US, India and China.From as high as 34 million carats in 2007, diamond production has plateaued in the last few years as Debswana caps production to match weakening market conditions. On the other hand, there has been no significant increase in production from other big mining players such as Tati, BCL and Botash.
While mining continues to decline mainly due to the plateau in the production of diamond and other minerals, sectors such as construction and manufacturing have been edging up in the past few years, mainly due to government spending.Due to uncertainties emanating from the US and the Eurozone that will result in lower demand for commodities, Botswana's mining output is expected to stagnate at zero percent growth in 2013