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IMF shaves Botswana 2018 forecast

All eyes are on Debswana mines for signs on the economy's perfomance PIC: MORERI SEJAKGOMO
The International Monetary Fund (IMF) has trimmed its forecast of the country's growth this year from 4.8 percent to 4.6 percent, signalling a slight revision following initial optimism focused around stronger projected demand for diamonds.

The IMF’s projections are contained in its April World Economic Outlook released on Tuesday.  Last August, IMF researchers forecast Botswana’s 2018 growth at 4.8 percent, following an in-country assessment conducted as part of its annual consultations with local fiscal and monetary authorities.

Tuesday’s downward review swims against the tide, as the World Bank in January upped its forecast of Botswana’s 2018 growth from 4.2 percent to 4.7 percent, while the Bank of Botswana (BoB) has said that it expects a strong performance in line with the official government projection of 5.3 percent.

Although the IMF did not provide details for its revision, in a broader commentary, researchers noted the risk of spillover into the region from the weak performance of the South African economy. “The recent weak economic performance in South Africa has slowed growth in neighbouring countries,” the researchers said.

 “The regional spillovers are likely to be transmitted through various channels, including intraregional trade such as the Southern African Customs Union and banking for Botswana.” The mixed forecasts for the economy this year mirror the performance of the key diamond sector where output from Debswana rose 12% in the first quarter to 5.8 million carats, while rough diamond

sales dropped eight percent to P8.8 billion.

The numbers suggest the continuation of a trend noted by De Beers of a preference in the market for lower value stones.

The BoB, however, says the higher activity in the diamond sector is good news for downstream industries, which should hold up the official forecast for growth.

“With those increased diamond sales, we expect some improvement in diamond polishing activities and other sectors, which is where we see better growth in the trade sector,” the BoB’s Research and Financial Stability director, Tshokologo Kganetsano told BusinessWeek.

“In the water and electricity sector, we are expecting stable supply, which in turn is important for production, especially as we are coming from periods of shortages. This will in turn support economic activity.” The IMF said recovering commodity prices would support sub-Sahara African growth, although broadly the average growth rate per capita remains around zero. Meanwhile, the IMF maintained its forecast of the country’s 2018 inflation at 3.7 percent, while marginally upping its 2019 forecast from 3.7 percent to 3.8 percent.  Inflation in March was measured at 2.8 percent, with the central bank saying it expected upward pressure to remain modest this year.




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