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Friday 25 July 2014, 13:09 pm.
IMF predicts lukewarm economy in 2013

The International Monetary Fund (IMF) predicts that the Botswana economy will grow by 3.9 percent this year. The forecast is marginally above the 3.7 percent recorded in 2012, with strong non-mineral activity compensating for the expected weakness in the mining sector.
By Brian Benza Fri 11 Oct 2013, 15:50 pm (GMT +2)
Mmegi Online :: IMF predicts lukewarm economy in 2013

In the World Economic Outlook (WEO) report released this week, the IMF says it  sees the local economy growing at a steady rate again next year before growth picks up slightly to 4.4 percent in 2015 supported by the base effect of increased electricity production and a recovery in the mining sector.

The economy is expected to subsequently stabilise at around 4 percent thereafter. The IMF predictions follow this week's publication of strong second quarter Gross Domestic Product (GDP) figures by Statistics Botswana, in which a robust recovery in diamond production saw the country recording the highest quarterly economic growth figures in almost three years.

According to the figures, economic growth, measured by real Gross Domestic Product (GDP), registered a 7.9 percent increase between April and June this year, doubling the 3.3 percent growth rate recorded in the previous corresponding period.

The mining sector, which had contracted by -3.6 percent in the first quarter, expanded strongly by 15.6% during the second quarter catapulting the sector's contribution to GDP up to 27% from 19% in the first three months of the year.

 On the monetary side, the IMF says headline inflation is likely to remain close to the upper end of BoB's 3-6 percent medium-term objective range in the remainder of 2013.

"However, below normal rainfall for the region, poses a potential upside risk to food prices. At the same time, fiscal consolidation, underpinned by government wage restraint, should help to contain demand-push inflationary pressures," says the IMF.

On trade and financial flows, the IMF predicts Botswana's current account deficit to narrow in the coming years supported by public sector savings generated by the planned fiscal consolidation and the expected recovery in diamond exports along with global recovery.

The current account records a country's net trade in goods and services, plus net earnings from rents, interest, profits, and dividends, and net transfer payments.

According to the IMF, Botswana's current account deficit will sit at -1.8 percent of the GDP this year before narrowing down to -1.2 in 2014 as measures by the government result in tempering the rate of growth of household borrowing, and a slowdown in import growth. This combined with a stable electricity supply by Morupule B power plant, will contribute to closing the current account deficit.

The IMF forecasts the deficit to be wiped out in 2015 when the balance on current account will be 2.4 percent of the GDP.

 "More broadly, success toward export diversification and an improvement in competitiveness, underpinned by the implementation of regulatory and structural reforms should help the return to a current account surplus and enhance external sustainability over the long term," says the IMF.

On the regional forecast, the Bretton Woods institution says growth in Sub-Saharan Africa remained robust in 2012-13 and is expected to accelerate somewhat in 2014, reflecting strong domestic demand in most of the region. Nevertheless, the experts say spillovers from sluggish external demand, reversal of capital flows, and declines in commodity prices are contributing to somewhat weaker growth prospects in many countries.

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