The International Monetary Fund (IMF) has reduced its forecast economic growth for Botswana this year to 3.5 percent from 3.9 percent, citing the subdued outlook for commodity prices and the impact of global trade tensions.
The IMF’s downward revision flies in the face of government’s own positive expectations for 2019 growth, as seen in a recent upward adjustment of the outlook from 4.2 percent to 4.3 percent.
Government said the higher output would be led by non-mining, specifically the services sector while ongoing structural reforms such as improving the ease of doing business would support the growth.
However, in its latest update of the World Economic Outlook (WEO) released on Tuesday, IMF researchers generally effected similar downward revisions for other emerging market and developing countries linking this, in part, to global trade and domestic policy uncertainties.
The Bretton Woods institute also cut the global growth forecast down to three percent, the lowest since the global financial crisis, citing geopolitical uncertainties, rising trade barriers and other factors.
The WEO is the world’s most authoritative research analysis on global economic trends, threats and forecasts, covering the IMF’s 189 member states, which include Botswana.
The IMF publishes the WEO twice a year, initially in April before a revision in October. Analysts believe the latest downward revision is linked to the weaker outlook for rough diamonds, which have experienced severe difficulties.
Thus far this year, De Beers’ rough diamond sales have encountered severe difficulties owing to high levels of inventory in the midstream, where manufacturers are also struggling to secure credit.
De Beers, which owns 50% of Debswana, has thus far recorded year to date sales of $3.21 billion compared to $5.39 billion and $5.31 billion by the same time in 2018 and 2017 respectively.
The Finance and Economic Development ministry has also warned of significant headwinds to both the budget and GDP as a result of the diamond downturn and its spillover onto other sectors.
IMF researchers said commodity-exporting developing economies such as Botswana were facing additional pressure on their public finances from the subdued outlook for commodity prices.
“Beyond placing public finances on a sustainable footing, economies in this group also need to diversify away from dependence on resource extraction and refining,” the WEO reads.
“Although country circumstances differ, policies to help achieve this broad goal include sound macroeconomic management, lifting of education quality and worker skills to encourage more broad-based labour force participation, investment to reduce infrastructure shortfalls, boosting of financial development and inclusion, strengthening of property rights, contract enforcement, and reduction of trade barriers to incentivise the entry of firms and private investment.”
The IMF’s latest forecast for Botswana is higher than the 2.8 percent average for middle-income sub-Saharan countries and the 3.2 percent average for sub-Saharan Africa.
Regionally, Malawi is expected to witness the highest growth in 2019 with 4.5 percent while Zimbabwe will contract the most at -7.1 percent.