The International Monetary Fund (IMF) says its expectation that Botswana will top sub-Saharan Africa’s growth this year is based on the depths to which the economy fell last year and the rebound it will experience this year.
The IMF has projected that the local economy will grow by 9.2 percent this year, while government expects a 9.7 percent expansion. While both figures are significant, analysts have explained that the levels of the forecasts are technical and related to the depth of the drop last year, rather than explosive growth this year.
The economy shrank by 8.5 percent last year, with nearly all sectors experiencing deep contraction due to the interventions done by government to contain COVID-19.
IMF African Department director, Abebe Selassie told BusinessWeek the institution expected economic growth in Botswana to return to pre-crisis levels in the medium term. He, however, said there were risks to this outlook.
“This high growth (for 2021) is good, and it is something to be grateful for, but I think over the medium term we will see growth reverting to the pre-crisis path, which is of course considerably lower than the 9.2 percent that will be registered this year,” he said in a briefing. “In terms of risks to the outlook, in Botswana's case, a lot is going to depend on the reforms that are being pursued by the government.”
Government’s major reforms in the short to medium term are captured in the Economic Recovery and Transformation Programme (ERTP), the P14.5 billion blueprint designed to reprioritise spending towards transforming the economy and fast-tracking diversification.
“Pre-crisis an important policy agenda item was economic diversification away from relying on diamonds to broadening sources of economic activity that could bolster growth and revenues,” Selassie told BusinessWeek. “I think that agenda is something that will need quite a bit of attention against social protection. “In addition, strengthening human capital is also going to be a very important part of the policy agenda. “Subject to progress in these areas, there should be an upside to the growth path that we are seeing in our projections.”
The IMF expects 2022 growth for Botswana to reach 4.7 percent, while government has projected 4.3 percent.