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Botswana growth forecast revised

Staff Writer
London-based Business Monitor International (BMI) has revised upwards its full year growth forecast for Botswana from -9.9 percent to -6.5 percent for 2009 because of significant recovery in diamond exports in the second quarter of the year. The firm now expects Botswana's economy to have a robust growth in 2010.

"GDP growth in 2009 has not been as catastrophic for the economy as once had been anticipated. Indeed, with the economy having contracted less than previously envisaged in 2009 and given a rebound in exports, we are anticipating relatively robust growth in 2010," BMI said in its recently published Botswana 2010 Business Forecast Report.

Following 450 bases points (bps) of interest rate cuts starting in November 2008, the Bank of Botswana (BoB) ended its easing cycle in August 2009.

However, BMI said the expected robust growth coupled with the prospect of resurgent inflation and the likely course of South African monetary policy means that BoB may hike rates by 50bps hike in 2010 perhaps in the second half of the year. BoB governor Linah Mohohlo said recently that the domestic economy rebounded in the third quarter with overall growth standing at 1.3 percent due to government spending, monetary policy easing and the global economic recovery.

She said as a result of the world economic upturn, diamond production has resumed in response to a steady revival of

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overseas demand and it is expected the trend will continue in the second half of the year.

BMI said the business environment in landlocked Botswana should be improved by plans to build a port on Namibia's coast. This will enable Botswana to collect, store and distribute cargo directly. The new harbour will have a direct link to Botswana via the Trans-Kalahari corridor. A feasibility study for the development of the land and the construction infrastructure such as warehouses and a container terminal is expected to be done by the end of the year.

"If it goes ahead, the project would significantly reduce the time and costs of processing Botswana's trade," the BMI said.

It added that the world financial crisis has served to illustrate the lack of progress made in attempts to diversify the Botswana economy away from dependence on mining and this will be more pressing than ever for the government.

Also on the agenda of the government are problems in neighbouring Zimbabwe as these have both political and economic repercussions for Botswana.



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