The African Development Bank (AfDB) expects Botswana’s economy to expand by 3.8 percent this year, weighed down by its reliance on commodities that are exposed to international fluctuations.
The AfDB’s forecast, released this week, is the most conservative of the authoritative analyses usually released after the start of the financial year. The International Monetary Fund recently raised its forecast of local growth to 3.9 percent, while government whose own predictions are traditionally more optimistic, announced a 4.2 percent forecast in February.
In an indepth analysis of the broader Southern African region, the AfDB noted that while higher international mineral prices would bode well for Botswana, the country’s reliance on this exposure also heightened the threats to its economic outlook. “The heavy reliance on commodities continues to leave it (Botswana) vulnerable to international market fluctuations, pointing to the need to add more value to minerals and diversify the economic base,” AfDB researchers said. “Botswana thus has to target high-productivity sectors, reduce vulnerability to external shocks, and deliver a more inclusive, resilient, and job-creating economy.” The AfDB’s forecast comes as the Bank of Botswana doubles down on government’s official projection of 4.2 percent growth for 2019.
“There are several factors at play,” BoB’s director of research and financial stability, Tshokologo Kganetsano told BusinessWeek at a briefing on Wednesday. “We are looking at the expected growth in the global economy that should lead to improvement in some of our services sectors like tourism, trade, hotels and restaurants. “If the global economy performs as projected, that will have a spillover effect on the economy.”
He added that the central bank was also looking at the projected increase in government spending, which should add to economic activity in the domestic economy. “We also have price stability, which has been maintained for over five years now, financial stability and also exchange rate stability. “All those contribute to an environment that is conducive to business.
“You will also recall that government is implementing the Ease of Doing Business reforms, which have been a concern for investors in the past. “Government is doing all that it can to implement those and all those factors contribute to a positive outlook,” he said. Central bank governor, Moses Pelaelo said while global headwinds would potentially impact on diamonds and tourism, two of the country’s biggest economic sectors, fiscal and monetary authorities were confident in their forecast. “Our forecast for 2018 was 4.5 percent and indeed it came as 4.5 percent. Even for 2019, we hope that will be that. “We know better about ourselves,” he told BusinessWeek.