Economic contraction ‘lands softly’ in 2025
Lewanika Timothy | Monday April 6, 2026 06:00
The economy averted a major slowdown due to 8.2% growth in the third quarter, driven by diamond production ramping up in anticipation of mining maintenance plans.
The fourth quarter of 2025 recorded a year-on-year decline of 5.4%, mainly due to lower production in the mining and quarrying sector. The decline was mainly attributable to reduced output at the country’s diamond mines, which have carried the bulk of Botswana’s national output over the years.
While the Ministry of Finance and the International Monetary Fund had projected a 0.4% decline, the country's GDP contracted by 0.7%, which is softer than expected, given that there was no major recovery in diamond, as hoped for by the Ministry.
The 0.7 percent growth is also higher than the one percent contraction forecast by organisations such as the International Monetary Fund.
This week, Statistics Botswana figures published final-quarter data showing that economic growth lagged due to persistent weakness in mining & quarrying and diamond trading, resulting in overall negative growth.
“The real Gross Domestic Product shrank by 5.4 percent during the period under review, as opposed to a contraction of 1.9 percent in the same quarter of 2024,” researchers said. “he decline was attributed to the decrease of real value added for Mining & Quarrying.”
Economic recovery prospects remain fragile, with demand-side pressures beginning to weigh more visibly on the economy.
Another major contributor to GDP is consumption. Total final consumption expenditure decreased by 0.4% in the fourth quarter of 2025, compared to a 1.9% increase in the corresponding period in 2024.
Household final consumption declined by 0.3%, while government consumption also contracted by 0.5%, signaling a broad-based slowdown in spending across both private and public sectors.
The decline in household consumption reflects growing pressure on disposable incomes, as weaker economic activity, rising costs, and limited income growth constrain spending power. Consumers are increasingly shifting towards essential goods, cutting back on discretionary expenditure, a trend that is likely to dampen activity in retail, services, and other consumption-driven sectors.
“Total final consumption expenditure decreased by 0.4 percent in the fourth quarter of 2025, compared to the 1.9 percent increase recorded in the corresponding quarter of 2024. “Household Final Consumption went down by 0.3 percent while Government Final Consumption decreased by 0.5 percent,” researchers at Statistics Botswana revealed
This softening in demand comes at a time when Botswana's economic structure remains heavily reliant on government expenditure. Public spending continues to account for a significant share of GDP, effectively acting as the primary engine of economic activity.
As a result, any slowdown in government consumption, as reflected in the latest data, has an outsized impact on overall growth.