Botswana edges closer to recession

Brian Benza
Staff Writer | Friday May 15, 2009 00:00

 

Speaking at the release of the Bank of Botswana's 2008 Annual Report, Head of Research, Andrew Motsumi, said that according to the latest figures from the Central Statistics Office (CSO), Botswana's GDP was at 2.9 percent in the last quarter of 2008, meaning that the country was still enjoying positive economic growth.

Technically a country can be said to be in recession when it goes through two financial quarters of negative growth.

However, Motsumi said, it is highly likely that the country will slide into a negative growth soon as the global crisis continues to squeeze Botswana's revenue streams, while suffocating production at the same time.  Adding her voice to the discussion, Central Bank Governor, Linah Mohohlo said that Botswana will not avoid the recession as some of the largest economies in the world are already in the red.

'In 2009, the world economy is expected to contract by 1.3 percent, Europe (4.8 percent and Japan (6.2 percent). The effects of this have taken a little long to reach here but we are expecting to record negative growth very soon,' she said.

Due to the crash in the diamond demand, and consequent revenues, Botswana is now importing more than it is exporting leading to a trade deficit balance which has seen the country's foreign exchange reserves import cover fall from 30 months a year ago to around 20 months. However, Mohohlo says this is still a very comfortable figure compared to other countries such as Brazil and Mexico that averagely have an import cover of three to four months.

But according to Motsumi, in 2008, the country recorded a current account surplus of P8.7 billion, which was a 19.4 percent decline from the P10.8 billion in 2007. 'Overall external balance fell by 3.2 billion from P10.7 billion in 2007 to P7.5 billion in 2008,' he said.

Latest statistics from the CSO show that as at February 2009, Botswana, like in the previous months recorded a trade deficit of P1. 12 billion as total imports were valued at P2.3 billion while total exports were valued at P1.15 billion.

Trade deficits have been recorded consistently from October to date, while diamond revenues plummeted heavily particularly in the last quarter of 2008

At the end of 2008, the bank's assets amounted to P68.9 billion of which P68.6 billion were foreign reserves, which translated to 23 months import cover. On the liabilities side, government investment account increased in the year to P30.5 billion up from P27 billion in 2007 while Bank of Botswana Certificates (BoBCs) increased by 6 percent up from P16.6 billion in 2007 to P17.6 billion in 2008.

Commenting on the financial performance of the bank, Motsumi said that net income for the year was P10.9 billion while major costs included P2.1 billion in interest expenses. Administration costs totaled  P278 million.

Deputy head of research, Kealeboga Masalila said that, despite food prices not falling as much as fuel prices have, the bank is confident of achieving an annual inflation rate which will be closer to six percent by year end.