Local economy could shrink by 5.4%, IMF says
Mbongeni Mguni | Thursday April 16, 2020 18:27
Should the figure projected by the IMF be realised, 2020’s contraction will the second worst annual GDP performance in the country’s history since the -7.7% recorded in 2009 when the global recession hit local shores.
In its World Economic Outlook released yesterday, the IMF forecast that growth would bounce back to 6.8% for Botswana in 2021. That level, if realised, would be the highest on an annual basis since 2013 when the local economy expanded by 11.3%.
The IMF’s projections are the most authoritative to emerge for the lockdown. The Bank of Botswana recently said its forecast of 4.4% growth for 2020 would decline considerably in upcoming updates, while analysts at leading economic consultancy, Econsult, projected a contraction of 4% in an assessment released last month.
In its outlook, the IMF acknowledged Botswana’s efforts to respond to the pandemic’s impact on the economy, noting the tax relief measures and targeted support to households. Government’s response to the pandemic has comprised fiscal and monetary policy interventions, including the COVID-19 Relief Fund which government is supporting to the tune of more than P5 billion.
“Despite the limited space, timely fiscal support is crucial to contain the spread of the virus, protect vulnerable firms and households, mitigate the overall economic impact, and promote a quick recovery to prevent the economic losses from becoming permanent,” IMF researchers said.
“Beyond essential health and social spending, the scope for additional discretionary fiscal easing will depend on country-specific circumstances.”
The IMF also said while the presence of a large informal sector in some countries could make targeted policies difficult to implement, several options are available. These include temporary tax relief, preventing arrears accumulation, tax and customs exemptions on health products, government guarantees and subsidised loans and others.
“However, all firm-specific support should be done transparently to ensure good governance,” the researchers said.
The IMF said on the expenditure side, priority should be given to scaling up and facilitating access to existing social programs, possibly through broader targeting.
“Cash transfers should be prioritised when possible. One-off transfers through mobile money could be considered to reach people at scale, particularly in the informal sector, provided that recipients can be identified based on readily available socioeconomic information,” said the IMF.
Last year, the local economy grew by three percent, compared to 4.5% in 2018. Government had expected the economy to grow by 3.6% in 2019, while the IMF had projected 3.5%.