Economic growth target too optimistic � BoB
Brian Benza | Friday June 24, 2016 18:00
In the 2016/2017 budget speech presented in February, finance minister, Kenneth Matambo projected the economy to bounce back from a negative 0.3 percent growth rate in 2015 to 4.2 percent this year.
But in a report highlighting the 2016 Business Expectations Survey (BES) released on Tuesday, the central bank said in spite of the fiscal interventions through the Economic Stimulus Programme (ESP) there still exist challenges that are likely to retard economic growth to levels south of the projected 4.2 percent.
“The Budget Speech forecast overall real GDP growth of 4.2 percent for 2016 and 4.3 percent for 2017. While this forecast may be optimistic, there could be some support for the domestic economy through discretionary fiscal policy such as the ESP.
“However, continuing water rationing and the lingering risk of power supply disruptions remain constraints on economic activity.
“The projected growth of 4.2 percent appears to be at the upper end of expectations,” said the central bank.
The BoB’s sentiments towards the economic growth projections were also echoed by respondents to the BES with businesses expecting real Gross Domestic Product (GDP) to grow by 3.3 percent in 2016 and by 3.5 percent in 2017.
In the Regional Economic Outlook for sub-Saharan Africa released last month, the International Monetary Fund (IMF)estimates Botswana growth rate to print at 2.5 percent this year.
This is lower than the 3.7 percent the Bretton Woods institute predicted for the country in April following a consultative visit to Gaborone. The IMF has also lowered Botswana’s 2015 growth rate to a negative 1.5 percent, a figure that is significantly lower than the minus 0.3 percent estimated by Statistics Botswana.
The downward revision by the IMF came shortly after ratings agency, Standard and Poor’s (S&P) revised Botswana’s economic outlook from ‘stable’ to ‘negative’.
S&P said the revision of the outlook to ‘negative’ is meant to reflect the downside risks emanating from the possibility of a prolonged commodity price shock, especially in the diamond sector.
“Overall, the sound fiscal position strengthens the country’s resilience to external shocks.
The sovereign credit ratings are constrained by the country’s narrow economic base and the continued dominance of the diamond sector in the economy, which makes the country susceptible to external shocks,” S&P stated. For 2016, economist Keith Jefferis says he sees a growth rate of between 1.5 percent to two percent, with a further slight contraction in mining, but modest positive growth across the rest of the non-mining private sector.