GDP to pick by 5% on strong non-mining sector

Letty Masunga
Tuesday, 30 January 2018
ECONOMY RECOVERY...Manufacturing sector set to boom ECONOMY RECOVERY...Manufacturing sector set to boom

Botswana’s economy is projected to see a sustained pickup in the medium term, with real Gross Domestic Product (GDP) growth projected to rise to nearly 5 percent in 2018.

Supporting this growth will be the good performance in non-mining and the continued recovery in mining. This is according to the 2018 Edition of the African Economic Outlook (AEO), a flagship report that highlights state of socio-economic performance, outlook and progress in the 54 African countries.

The report was made public some days ago. It says mineral exports are likely to continue to pick up gradually, with growth in non-mining driven largely by service-oriented sectors, notably trade, hotels and restaurants, and transport and communications, supported by accommodative fiscal and monetary policies. “As real GDP growth increased from 4.3 percent in 2016 to an estimated 4.5 percent in 2017, it was predominantly driven by broad-based expansion in non-mining activities, notably water and electricity; trade, hotels, and restaurants; transport and communication; and construction.”

The report highlights that the continued expansion of construction, associated with the economic stimulus programme (ESP) and planned upgrades of electricity and water infrastructure, is expected to further boost growth.

The African Development Bank published the report last week and is the first to provide headline numbers on Africa’s macro-economic performance and outlook.

It is expected that the manufacturing sector will recover moderately, benefiting from improvements in electricity generation and water supply. 

The performance of these sectors will outweigh the sluggish performance in agriculture while the adverse weather could further weaken agricultural growth and lead to water supply challenges.

“Despite good weather, agricultural output will remain subdued as crop production continues to be hampered by traditional farming methods, erosion, and disease,” it says.

However, with the positives in place, the report also takes note of the downside risks to the positive medium-term outlook, which it says; remain elevated. 

“The dependence on diamonds for export and growth makes Botswana extremely vulnerable to external shocks. Key risks include the sluggish recovery of the global economy and uncertainty surrounding global trade and openness, which could reduce export earnings.”

It also notes the underwhelming economic conditions in South Africa which could adversely affect SACU receipts. Indeed, a modest budget deficit is projected for 2018, reflecting lower mining revenues, reduced revenues from the Southern African Customs Union (SACU), and higher spending associated with the economic stimulus programme.

With regards to risks, delays in construction projects in electricity and water and a slow pace of structural reforms foster downside risks and underscore the need to resolve the energy and water crises and accelerate structural reforms. This, says the report, includes reforms to reduce skill mismatches to facilitate economic diversification and increase productivity.

“Accomplishing these initiatives will promote economic transformation and enhance the resilience of medium-term growth prospects, it concludes.

The African Economic Outlook bridges a critical knowledge gap on the diverse socio-economic realities of African economies through regular, rigorous, and comparative analysis.

It provides short-to-medium term forecasts on the evolution of key macroeconomic indicators for all 54 regional member countries, as well as analysis on the state of socio-economic challenges and progress made in each country.

It presents the African Development Bank economists’ analyses of African economic development during the previous year and near term.

 It has become the main flagship report for the African Development Bank, as well as reference material for those interested in Africa’s development, including researchers, investors, civil society organisations, and development partners.

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