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AfDB optimistic on Botswana's economic bounce-back

AfDB optimistic on Botswana's economic bounce-back
The African Development Bank (AfDB) expects that the local economy could shrink by as much as 7.3 percent this year and bounce back in 2021 by as much as 5.5 percent, the most optimist projections made thus far on the coronavirus (COVID-19) impact.

By comparison, the IMF expects the country’s economy to shrink by 9.6 percent and return to 8.6 percent growth next year while government is forecasting 13.1% contraction this year and 3.9 percent growth next year.

Traditionally, government’s numbers are usually the most optimistic but the Finance and Economic Development ministry has warned that the pandemic will play havoc with the local economy till the end of NDP 11 in 2023.

In its economic outlook for the continent released on Tuesday, AfDB researchers grouped Botswana amongst economies to be hardest hit by COVID-19, due to their dependence on mineral resources and tourism. Both sectors are amongst the most vulnerable to pandemic responses such as closure of borders and restrictions on movements.

“The macroeconomic outlook has deteriorated as global containment measures disrupted supply chains, curtailed transportation, and lowered demand,” the AfDB researchers said.

“These developments are likely to severely affect Botswana’s diamond and tourism industries, which respectively account for more than 80% and 13.4% of its export earnings (respectively).

“Botswana’s regional trade will also suffer from the lockdown in South Africa, which supplies about 60% of its imports.”

The researchers said the economy would,

at best, contract by 5.5 percent in 2020 and bounce back, at least, by five percent in 2021. The difference between the best and worst case outcomes would be the duration of the pandemic.

“The range is dependent on the pandemic slowing down by July 2020 or continuing until December 2020.” Commenting on the tourism sector, the AfDB researchers said any revival would largely depend on the success of mitigating the pandemic and the easing of regional and global lockdowns, especially travel.

“Supportive government interim measures like reengineering the tourism industry through virtual tours and e-marketing would help ensure its recovery,” the researchers stated.

The AfDB ranked Botswana amongst African countries with the strongest fiscal positions to fight off the pandemic’s impact, noting that the country had the second highest external reserves after Algeria.

In addition, Botswana has a low dependence on remittances, a moderately prepared health system and low debt-service obligations.

A draft Economic Recovery and Transformation Plan leaked recently proposes to spend up to P40 billion in longer term economic initiatives. The plan is due to be discussed further in Cabinet before Parliament is approached for approval.


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