Thursday, April 18, 2024

AFDB pins Botswana growth to 7.5%

A statement from the African Development Bank (AFDB) indicates that the Botswana’s real Gross Domestic Product (GDP) growth is projected to recover by 7.5 percent in 2021 and 5.5 percent in 2022, based on a revival in domestic demand as the effects of the Covid 19 pandemic recede and economies reopen globally.

“Upside risks to the growth outlook hinge on the steadfast implementation of business environment reforms and government interventions against the pandemic, including the Economic Recovery and Transformation Plan (ERTP). Downside risks include lower diamond demand if the global economic recovery is weakened by renewed waves of infection. There are also threats from persistent drought and the adverse effects of poor economic conditions in South Africa on Botswana’s exports and SACU receipts,” elucidates the statement.

The statement further indicates that because of its low debt levels the country can fund its ERTP from both domestic and foreign sources. On the domestic side the government has increased its bond issuance by 50 percent. Other options include increasing domestic revenue mobilization and prioritizing public expenditure.

The report also expounds that the country’s economy contracted by an estimated 8.9 percent in 2020, after growing by 3.0 percent in 2019 as the Covid 19 lockdown and other movement restrictions constrained economic activity.

“On the supply side mining output declined significantly, mainly due to falling global demand for diamonds. Non-mining output also shrank, from both the pandemic induced domestic restrictions and weaker global markets. The subsectors most affected were trade, construction, manufacturing, hotels and restaurants, and transport. Monetary policy was accommodative to support growth, taking advantage of the prevailing low inflation,” states the document.

It further highlights that lower demand and fuel prices contributed to a reduction in the annual inflation rate from 2.8 percent in 2019 to 1.9 percent in 2020; below the Bank of Botswana’s target range of 3-6percent.

“The central bank reduced its policy rate to 3.75 percent in October 2020 after maintaining it at 4.25 percent from April to September 2020 and at 4.75 percent from September 2019 to March 2020. The fiscal deficit was estimated to widen to 8.7 percent of GDP in 2020 from 4.2 percent in 2019 as Covid 19 related spending rose and tax revenues fell due to reduced economic activity and imports,” states.

Botswana’s public debt, it underpins estimated at 17 percent of GDP in 2020 is low and sustainable. The current account deficit widened to 11.2 percent of GDP in 2020 from 7.6 percent in 2019mainly because of the fall in diamond prices and reduced Southern African Customs Union (SACU) revenues. International reserves declined to still relatively high $5.3 billion at the end of November 2020-enough to cover 10.9 months of imports-from $6.2 billion in December 2019.


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