The International Monetary Fund (IMF) has lowered Botswana growth prospects for 2016 as the country seeks to bounce back from a first negative growth rate in seven years.
In the Regional Economic Outlook for sub-Saharan Africa released this week, the IMF estimates Botswana growth rate to print at 2.5 percent this year.
This is lower than the 3.7 percent the Bretton Woods institute predicted for the country two months ago following a consultative visit to Gaborone. The IMF has also lowered Botswana’s 2015 growth rate to a negative 1.5 percent, a figure that is significantly lower than the minus 0.3 percent estimated by Statistics Botswana (SB).
The downward revision by the IMF comes shortly after ratings agency, Standard and Poor’s (S&P) revised Botswana’s economic outlook from “stable” to “negative”.
S&P said the revision of the outlook to “negative” is meant to reflect the downside risks emanating from the possibility of a prolonged commodity price shock, especially in the diamond sector. “Overall, the sound fiscal position strengthens the country’s resilience to external shocks.
The sovereign credit ratings are constrained by the country’s narrow economic base and the continued dominance of the diamond sector in the economy, which makes the country susceptible to external shocks,” said S&P.
The agency however reaffirmed Botswana ratings of “A-” for long-term bonds and “A-2” for short-term bonds in domestic and foreign currency denominated borrowing.
According to SB, Real Gross Domestic Product (GDP) growth for 2015 printed at -0.3 percent year-on-year compared from 3.2 percent in 2014, the first annual negative growth rate recorded since the 2008 global financial crisis.
SB figures show that the domestic economy decreased by 1.9 percent in the fourth quarter of 2015 compared to an increase of 3.9 percent accrued in the same quarter in 2014.
The decline was attributed to real mining value added, which decreased by 30.5 percent in the fourth
The decline in the value added of the mining sector is attributed to the continued weak recovery in the global markets, particularly in the major markets for diamonds.
In the fourth quarter, copper and diamond production decreased by 59.7 and 20.4 percent respectively.
During the fourth quarter of 2015, Mowana and Thakadu copper mines were put under provisional liquidation while there was also a plant shutdown at the BCL copper mine during the months of August, September and October 2015.
Underpinned by an expected recovery in both the mining and non-mining sectors, the Ministry of Finance estimates the domestic economy to recover in 2016 and 2017, with growth rates projected to be 4.2 percent and 4.3 percent, respectively.
The mining sector, which accounts for a quarter of the domestic output, is forecast to grow by 0.6 percent in 2016, and a further 0.7 percent in 2017, compared to the decline of 14 percent in 2015. The non-mining sector, on the other hand, is forecast to grow by 4.7 percent and 4.9 percent in 2016 and 2017, respectively, compared to 3.9 percent achieved in 2015.
“These growth forecasts are based on the expected moderate recovery in the global economy, as well as the impact of the domestic policy initiatives such the Economic Stimulus Programme,” said finance minster Kenneth Matambo in the 2016 budget speech. For 2016, Economist Keith Jefferis says he sees a growth rate of between 1.5 percent to two percent, with a further slight contraction in mining but modest positive growth across the rest of the non-mining private sector.