The central bank is buoyant that the domestic economy will grow at a much faster rate this year, citing some notable improvements in some sectors, despite mining, the bellwether of the economy growing at a slower pace.
Bank of Botswana’s bullishness is perhaps emanating from the fact that, crisis-lending institution, International Monetary Fund (IMF) recently upgraded the country’s growth forecast for the year from 4, 1 percent to 4, 5percent.
The forecast is even higher than the 4, 2 percent that was predicted by Finance and Economic Development Planning minister, Kenneth Matambo. At a press briefing this week, the bank’s Director for Research and Financial Stability, Dr. Tshokologo Kganetsano said they are upbeat that the economy will be in a much better shape than a disappointing past year.
He cited a number of sectors which are likely to lift the economy towards the last four months of the year. The agricultural sector, which was contributing about 40 percent to national Gross Domestic Product (GDP) before independence, is likely to add more value this year, on the backdrop of above-normal rains which were experienced early this year and late last year.
The farming and rearing sectors contribute less than 5 percent to national GDP due to a number of factors. “There is also a stable supply of water and electricity which will also support other sectors,” Kganetsano told the Press at a meeting to announce the bank rate decision on Tuesday.
The energy sector has in the past few years pulled back the economy on the backdrop of non-completion of major power projects such as Morupule B power station, leading to loss of production. The mineral-led economy is also buoyant that the recovery of major economies such as US and China will boost the domestic market. This is important because these markets are where most of our diamonds are destined. Not even a widely reported tiff between Botswana and China over the failed visit by Dalai Lama will dampen the economy’s mood. Botswana and China’s trade relations have increased over the years, diamond sales included. Deputy Governor, Dr Kealeboga Masalila said diamonds are polished and cut all over the world and as the central bank they cannot expect any drastic fall in diamonds destined to China, based on the recent reported ‘standoff’ between the two countries over the visit of Dalai Lama, which was cancelled at the last minute. Diamonds are the single biggest export for Botswana. The economy is already off to a good start, if figures from Governor Moses Pelaelo are an indicator for the economy going forward. GDP expanded by 3, 9 percent in the 12 months to March, compared to a contraction of 1, 8 percent in the same period last year.
“The improvement in growth reflects a 5, 9percent increase in non-mining activity, while mining sector output contracted by 10, 3 percent in the 12 months to March 2017,” said a statement read by Pelaelo. Despite strong growth forecast this year, there are fears that South Africa’s weak economic performance could potentially affect the domestic economy. South Africa is Botswana’s biggest trading partner. Ahead of a highly-charged elective conference for the ruling ANC this December, the Jacob Zuma-led country has been thrown into an economic and political quagmire, which has led to the economy being downgraded to junk status