In a statement S&P said although Botswana's narrow economic base is still a worrisome trend, the country's track record of prudent economic policies and high transparency are strong by emerging market standards. "The stable outlook balances the economic challenges that the government of Botswana faces against still strong government and external balance sheets. "We think these balance sheets will be maintained as Botswana continues to record fiscal and current account surpluses, with only intermittent and generally brief exceptions when diamond prices and customs union revenues are low.
"However, the country's narrow economy, incomes that are among the lowest in the 'A' category, high unemployment, and a high incidence of HIV/AIDS are key credit constraints," reads the report. Apart from a downgrade in 2009 during the economic recession, Botswana has perennially scored favourable ratings with the world ratings agency both on economic outlook and currencies. The economy has recovered from its 2009 contraction, and S&P forecasts real GDP per capita growth to expand at about 3 percent per year in 2012-2014, just under its pre-downturn rate, provided that demand for diamonds grows at least modestly.After the large fiscal deficits of 11.5 percent and 6.1 percent in the years ending March 31, 2010 and 2011, rising revenues and real expenditure cuts resulted in a smaller fiscal deficit of about 3.1 percent of GDP in 2011-2012. "We forecast that Botswana will run a surplus of 0.9 percent in the year ending March 31, 2013, thanks to high customs revenues from SACU, which are already known but are accounted for with a lag, as well as strong growth in other revenues and prudent expenditure management. We anticipate that, if diamond demand is close to prior trends and spending moderates, Botswana will record small fiscal surpluses averaging about 1.8 percent of GDP in 2012-2015," adds the report.
