Economy shrank 6 percent in 2009-CSO

Brian Benza
Staff Writer | Wednesday April 7, 2010 00:00

'Real GDP declined by 6.0 percent in 2009 from the revised 3.1 percent in 2008,' says a CSO statement. 'The drivers to the decline was mining and manufacturing industries, with mining being the major contributor to the decline at 9.9 percent.' GDP bounced back by a positive 7.2 percent in the fourth quarter of 2009 after shrinking by 20.9 percent, 2.5 percent and 7.9 percent in the first three quarters of the year respectively.

GDP is a primary health indicator of an economy that shows the total market value of goods and services produced in a country in a year. The 7.2 growth in the last quarter of last year was largely attributed to a rebound in the mining and agriculture sectors as the country shook off the effects of the global recession after a disappointing start of the year when diamond mines, the country's mainstay, were mothballed.  Diamond giant, Debswana, which contributes a third of the country's GDP, produced just above half of its usual output as demand for diamonds was suppressed by the global credit crunch.

However, the 6 percent fall in the economy is better than initial estimates by many authorities, among them the IMF and the World Bank, who had forecast Botswana's GDP to weaken by as much as 10 percent. The economy grew by 25.4 percent from a first quarter GDP of P4.87 billion in March to a second quarter GDP of P6.11 billion in June, putting an end to the period of technical recession.

Real gross domestic expenditure decreased by 8.6 percent in the fourth quarter of 2009 compared with an 8.2 percent increase in the third quarter of 2009. Real consumption demand, which is the final consumption expenditure by general government and households, increased by 7.7 percent in December 2009 while real gross fixed capital formation recorded a decrease in the same period.

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 19 months now.

After recording an increase in the third quarter, real exports and imports of goods and services recorded a decline by 6.3 and 12.0 percent respectively in December 2009.

In an effort to stimulate economic activity during these turbulent times, the government has decided to borrow from international lending agencies. Botswana has already accessed about US$1.5 billion from the African Development Bank.