IMF expects 7.5% rebound for Botswana
Mbongeni Mguni | Friday April 9, 2021 17:06
According to figures released recently, the local economy contracted by 7.9 percent in 2020 owing to the impact of COVID-19 across all sectors.
The IMF had forecast a contraction of 8.3 percent for 2020.
The IMF’s forecasts for Botswana are however the second-highest in sub-Saharan Africa, according to its latest World Economic Outlook report released on Tuesday, only exceeded by Kenya at 7.6 percent. The forecast for Botswana is also far above the sub-Saharan average of 3.4 percent growth for 2021 and the sub-Saharan middle income countries’ average of 3.8 percent.
“The pandemic continues to exact a large toll on sub-Saharan Africa especially, for example, Ghana,
Kenya, Nigeria, South Africa,” the IMF researchers said.
“Following the largest contraction ever for the region, –1.9 percent in 2020), growth is expected to rebound to 3.4 percent in 2021, significantly lower than the trend anticipated before the pandemic.
“Tourism-reliant economies will likely be the most affected.”
Local authorities have based their expectation of an 8.8 percent rebound on the implementation of the P14.5 billion Economic Recovery and Transformation Plan (ERTP) as well as the warming up of the key mining industry led by diamond production.
Already, De Beers, the diamond giant which is a 50/50 partner with government in Debswana, has recorded sales of $1.7 billion (P18.2 billion) in the three auctions it has held thus far this year. This is compared to $931 million (P10 billion) over the same period in 2020. The diamond giant holds 10 auctions or sights each year in Gaborone, for an exclusive list of global buyers known as sightholders.
Executives at De Beers have noted positive trends since the peak holiday retail period, although concerns have been raised by new lockdowns in India and rising restrictions in Europe. The IMF is also expecting local inflation to average 4.7 percent this year, keeping in line with Bank of Botswana projections that consumer prices would play toward the higher bound of the three to six percent medium-term target range.
The central bank expects inflation this year to be driven by factors such as the Value Added Tax increase, higher Botswana Housing Corporation rentals, fuel levy increase, higher electricity tariffs, the new sugar and carbon duty taxes, amongst others.
IMF researchers also forecast that the country’s current account will remain in deficit, estimated at minus 4.5 percent of the Gross Domestic Product, indicating weaknesses in the country’s international financial position with the rest of the world.
The current account, which reflects the value of exports and imports of both goods and services and international transfers of capital to and from a country, is dominated in Botswana by the trade balance which comprises goods and services exports and imports.
The IMF forecast, therefore, indicates that the value of imports of goods will continue to outstrip exports in 2021, maintaining a trend that has been seen in recent years. The IMF is expected to provide more details on sub-Saharan Africa and Botswana’s prospects for 2021 when it releases its report on the region in the coming days.