World Bank forecasts strong recovery for domestic economy

Staff Writer | Friday January 22, 2010 00:00

The Report, released on Thursday and researched by World Bank economists, predicted that Botswana's Gross Domestic Product would rebound this year, boosted in part by the stronger prices of diamonds and also by increased remittances and tourism activities.

Local economists are hoping the 2010 World Cup and its attendant increases in tourism and trade, will reflect on the country's books this year and beyond.

The Report predicted a GDP growth of 5.6 percent for Botswana in 2011, which would return the country to 2006 figures, when the economy was enjoying a mining boom and the birth of the cutting and polishing industry.The latest forecasts are a sharp contrast from the estimated 8.3 percent economic contraction witnessed last year, when output at the country's mines nosedived, bringing down large sections of the economy. This year, business confidence has been growing propped up by rising mineral prices and other fundamentals such as lower interest rates.However, local analysts are keeping an eye on how government plans to deal with the burgeoning budget deficit, which ballooned past the P6.2 billion mark pegged by the revised 2008/09 budget estimates.

The World Bank's economists equally cautioned that numerous risks lay in the path of Botswana, other middle income countries and Sub-Saharan Africa as a whole. 'The major risk facing the Sub-Saharan economies is that the world economy could experience a double dip or economic stagnation. 'This would undermine the recovery in external demand for the Sub-Saharan economies and would put pressure on commodity prices, undermining government revenues and possibly pushing debt to unsustainable levels,' the Report said.

Another risk identified by the World Bank involves trade within the Southern African Customs Union. The Global Economic Prospects Report said the fiscus in some of the smaller members of the Union could come under severe pressure over the next three years.

'This would be because one of the major revenue sources of the Union's revenue pool is related to taxes on South African imports, which have fallen rapidly in the aftermath of the global financial crisis,' reads the Report.

SACU receipts have previously helped Botswana's trade balance and balance of payments position.

The Report indicates that generally, Sub-Saharan Africa, excluding South Africa, will enjoy modest growth this and next year, although a plethora of internal and external factors could unravel this trend.Worldwide, the World Bank predicts that the global economic recovery presently underway will slow down later this year as the impact of fiscal stimulus wanes. The Bank's economists also predicted that developing countries faced higher borrowing costs, lower credit levels and reduced international capital flows.The Report also forecasts that the ripples from last year's global economic meltdown, will be felt in the global finance and growth sectors over the next ten years.'We cannot expect an overnight recovery from this deep and painful crisis, because it will take many years for economies and jobs to be rebuilt. The toll on the poor will be very real,' said Justin Lin, World Bank Chief Economist and Senior Vice President, Development Economics.