Last Updated
Thursday 27 August 2015, 18:00 pm.
Botswana outlook stable, but risks intensify - World Bank

The World Bank has ranked Botswana sixth among sub-Saharan countries most exposed to any "marked deterioration" of the economic crises plaguing the Euro zone.
By Staff Writer Sat 29 Aug 2015, 05:00 am (GMT +2)
Mmegi Online :: Botswana outlook stable, but risks intensify - World Bank








The institution's Global Economic Prospects (GEP) 2013 suggests projections for Botswana's economic growth this year could decline by about one percent should the Euro zone crisis escalate.

The World Bank expects the local economy to grow by 4.1 percent this year, while a Bank of Botswana survey of resident businesses forecasts 4.9 percent. Government's own projection is expected next month.

The World Bank's researchers also placed Botswana among a global list of 45 countries that would be hardest hit by a drop in commodity prices in the medium term.

Using a scenario of a 20 percent drop in commodity prices between 2013 and 2015, World Bank researchers forecast that Botswana's economy would shed 0.6 percent.

According to the GEP, the World Bank's projections for Botswana revolve around the possible direction of the Euro zone, US and Chinese economies in 2013 and beyond.

Being major commodity markets, the economic prospects of all three in the medium term are expected to have a robust on commodity prices, directly affecting Botswana whose economy is primarily supported by mineral exports.

"Financial markets tensions in the Euro Area have eased since 2012 Q2 and the likelihood of a serious deterioration in conditions decreased," World Bank researchers said.

"Nonetheless conditions still remain fragile and sentiment is vulnerable to bad news. (Also) with Chinese demand accounting for some 50 percent of many industrial metals exported from Africa, a sharper than envisaged downturn there could lead

to a slump in commodity prices which would impact the non-diversified metal and mineral exporters in the region such as Botswana, Zambia, Namibia and the DRC."

The GEP researchers warned that the direction of the US economy also posed a risk to Botswana and other sub-Saharan economies, mainly through the uncertainty linked to the ongoing fiscal consolidation.

"Given the importance of the US economy in global markets, the indirect impacts through weaker confidence and the potential rattling of global financial and commodity markets would likely have a stronger impact on the region," the GEP reads.

World Bank researchers, however, also noted opportunities for sub-Saharan growth in the medium term, including that spurred by the generally accommodative monetary policy stances in place across most countries.

Locally, the Bank of Botswana has held the bank rate steady since December 2010 and frequently hinted at possible loosening of monetary policy in order to stimulate growth.

"With the lag in monetary policy transmission, the widespread cuts in policy rates in 2012 are expected to provide some stimulus to economic activity through 2014," researchers said of sub-Saharan Africa.

The World Bank believes foreign direct investment into the region will continue strong in the medium term, rising to record levels each year and anchored by extractive industries and agriculture, should commodity prices remain high.

For 2013, the World Bank has forecast 5.8 percent growth in Gross Domestic Product (GDP) at market prices.



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