IMF forecast moderate growth in 2014
Brian Benza | Wednesday May 7, 2014 10:57
An IMF mission led by Lamin Leigh, which visited Gaborone last week to consult with Botswana government officials, says that the country is undergoing a cyclical recovery in line with its major trading partners although last year’s economic growth rate is unlikely to be matched this year.
“The economy grew faster than expected in 2013 at about 6 percent, owing to the improved performance of the mining sector.
“However Real GDP growth is expected to moderate to 4.5 percent in 2014, as the slowdown in diamond recovery and continued problems in electricity production and water supply will likely soften the pace of economic activity,” said Leigh in a statement released after the conclusion of the mission.
In the World Economic Outlook (WEO) report released in April, the IMF had said Botswana’s economy was seen growing at 4.1 percent this year before rising to 4.4 percent in 2015.
The IMF projections also tally with local economists who predict growth to be likely restricted to lower than five percent in 2014, in part due to the prevailing water and electricity shortages that have disrupted production across all economic sectors.
Powered by a rebound in diamond production, the economy beat analyst’s expectations to grow by an impressive 5.9 percent in 2013 reversing a three-year streak in which the economy grew at a slowing rate.
“In 2014, it is expected that mining would continue to grow but not at the same rate. “We also expect non-mining growth to slow marginally, in part due to the disruptive effects of power and water shortages. Hence overall GDP growth in 2014 is likely to be lower, at around 5 percent,” economist Keith Jefferis told Mmegi in an earlier interview.
According to figures released by Statistics Botswana last month, there was a significant decrease in the value added to the economy by the water and electricity sector in the fourth quarter of 2013 due to sporadic shortages experienced last year.
The sector recorded a decrease of 205.5 percent in the fourth quarter of 2013 compared to a decrease of 60.5 percent recorded in the same quarter of the previous year.
Looking ahead, the team advised that for Botswana to return to the period of high growth rates and improve on its middle-income status new policies have to be put in place to bolster economic activity.
“Returning to an era of strong growth and accelerating Botswana’s convergence to higher income levels would require a set of policies to reinvigorate economy-wide productivity including addressing the skills shortage in the economy.
“These include improving the quality of public spending, the efficiency of the tax system and addressing the skill mismatch in the labour market,” said Leigh, who was in the country between April 22 and May 2.
In that regard, the team commended the government on the skills development policies announced in the 2014/15 budget which they said should be seen as an integral part of a broader set of policy actions that include employment, investment and innovation policies in order to reinforce the links between the educational system and labour market outcomes.
While in the country the IMF mission met with Minister of Finance and Development Planning, Kenneth Matambo, Bank of Botswana Governor, Linah Mohohlo, Permanent Secretary Ministry of Finance and Development Planning Solomon Sekwakwa, senior government officials, development partners and representatives from the private sector and civil society.