The economy is still in doldrums even though statistics show that the worst appears to be over for Botswana trade as recent positive export figures point to a brighter future.
In a second quarter economic review report, the Chairman of the Bifm Investment Committee Dr Keith Jefferis says even though recovery to historic levels might still be a long way off, evidence of recent trade data shows that the worst of the crisis may be over with regards to Botswana's exports.
However, for the economy in general, another twelve months is still required for a complete rebound, as non-mining sectors such as tourism are still to feel the worst of the global economic recession pinch
"It is clear that export performance improved during the first four months of the year, with exports much higher in March and April than in January and February," Jefferis says.
"This largely reflects improvements in diamond sales.
"Diamond sales through De Beers' Diamond Trading Company (DTC) have picked up, and the cycle of weakness that began in the last quarter of 2008 has clearly turned. In the fifth sight of the year held in June, diamond sales were only around one-third lower than in 2008, although for the full half-year, the value of sales was 80 percent lower."
According to the Rapaport group, DTC's diamond sales have improved from an estimated US$100 million in January to over US$450 million in the June 2009 sight.
Botswana's trade deficit has started to slowly ease off as diamond sales have begun to pick on the back of renewed hopes of a recovery. According to the Central Statistics Office, like the month before it, April 2009 recorded a trade deficit of P204.3 million but it was the first month to register a trade deficit of less than one billion since October 2008. Total exports were valued at P2 billion during April 2009, having increased by 26.9 percent from P1.5 billion recorded during the previous month of March. The increase in total exports were largely attributed to the higher diamond sales of P1.5 billion from P823.4 million in March as confidence starts to come back to the market that has been ravished by the global recession.
" The encouraging numbers for exports will mean improved revenues for the government and the companies themselves, but other sectors such as tourism will take a bit longer.
"Tourists that are coming
Commenting on economic growth, Jefferis says although the economy is in a technical recession having experienced two successive quarters of negative growth, encouraging news is that outside the mining sector, the impact of the global crisis on Botswana has so far been limited.
"Botswana has so far avoided a severe generalised short-term impact from the global recession, reflecting the country's limited dependence upon foreign capital flows, aid and inward remittance flows, high levels of accumulated savings and foreign exchange reserves and limited linkages between mining and the rest of the economy," he says.
"Looking forward, we do not expect there to be a sharp contraction in economic activity outside of the mining sector, or a dramatic increase in unemployment.
Nevertheless, incomes are likely to experience a progressive squeeze as the impact of the slowdown in exports spreads to the rest of the economy, as credit constraints bite, and as fiscal sustainability requirements lead government spending to be held in check."
Going forward, Jefferis reckons the situation will be different as interest costs are likely to add significantly to government spending while debt repayment obligations will need to be carefully managed in order for the debt position to remain sustainable.
"While non-mining activity is unlikely to drop sharply, as mining has done, conditions in the broader economy will become increasingly difficult as there are signs that some non-mineral exports are under pressure, bank credit has stopped growing, and arrears on credit are rising," he says.
"On the positive side, inflation continues to fall sharply and interest rates have been accordingly reduced significantly. Government spending has risen rapidly despite limited austerity measures, and this has provided strong support for the economy."
But Jefferis laments the projected large budget deficits that, he says, will constrain the government's ability to continue fiscal stimulus into the medium-term.
"Funding these deficits will result in the accumulation of significant public debt, which will pose new challenges in the management of the economy," he says.