IMF shaves Botswana’s economic growth estimate

Mbongeni Mguni | Monday April 25, 2022 06:00

Uncertain times: De Beers has adopted a “cautious and watchful” attitude to its second quarter performance due to the war in Ukraine. While Botswana could potentially benefit from sanctions on Russia’s diamonds, lower global growth as a result of the war could dampen consumer appetite for the precious stones PIC: MORERI SEJAKGOMO

The latest projections are contained in the IMF’s World Economic Outlook (WEO) released on Tuesday and follow from the October WEO. The IMF’s latest forecast is the same level that the Finance and Economic Development ministry projected in February during the Budget Speech.

While IMF analysts did not provide details on the revision for Botswana, the WEO indicates that the global economy will come under pressure from the impact of the Ukraine war as well as COVID-19 lockdowns in China.

“The war will severely set back the global recovery, slowing growth and increasing inflation even further,” IMF analysts said. “This report projects global growth at 3.6 percent in 2022 and 2023—0.8 and 0.2 percentage points lower than in the January forecast, respectively. “The downgrade largely reflects the war’s direct impacts on Russia and Ukraine and global spillovers.”

The WEO explains that because Russia is a major supplier of oil, gas, and metals, and together with Ukraine, of wheat and corn, the current and anticipated decline in the supply of these commodities has already driven their prices up sharply.

“Europe, Caucasus and Central Asia, Middle East and North Africa, and sub-Saharan Africa are most affected. “The food and fuel price increases will hurt lower-income households globally—including in the Americas and Asia,” the analysts said.

Separately, a report by the World Bank released on Monday indicates that while countries such as Botswana have very little direct exposure to imports from Russia or Ukraine, the war will impact their economies through higher global commodity prices.

The World Bank report indicates that Botswana has the ninth least direct imports from Russia or Ukraine.

“The Russia-Ukraine conflict has affected sub-Saharan African economies through higher commodity prices and disruptions in international trade—thus, aggravating existing supply chain problems,” the World Bank noted. “A sharp compression of imports from Russia and Ukraine, along with global trade deceleration and rising commodity prices, have affected countries in the region that are net commodity importers—either through direct linkages with the countries in conflict or through soaring global commodity prices.”

The World Bank expects that while Botswana may benefit from the diamond trade shock caused by the Ukraine conflict, rising oil prices and softening demand in China for diamonds could add pressure on the economy.

Meanwhile, the IMF’s projection of 4.3 percent growth for Botswana in 2022 places the country above the 3.8 percent average expected for sub-Saharan Africa. The region’s highest performers this year are expected to include Niger, South Sudan and Rwanda, while the low performers could include São Tomé and Príncipe as well as South Africa and Eswatini.

Regionally, Botswana’s forecast economic performance this year will be the highest, followed by 3.8 percent in Mozambique and 3.5 percent in Zimbabwe. According to the IMF’s projections, South Africa will experience the lowest economic expansion with 1.9 percent, followed by Eswatini with 2.1 percent and Namibia with 2.7 percent.

For 2021, the IMF still expects Botswana’s growth to be sub-Saharan Africa’s highest at 12.5%, a significant revision from the 9.2 percent forecast in the October WEO.

Statistics Botswana is due to unveil the 2021 economic growth figures on April 30.