Monday, August 15, 2022

Balance of trade in deficit, exports recover

Botswana GDP started showing signs of recovery in 2010 as exports mainly minerals showed that the economy is not well diversified and heavily reliant on diamonds.

Bifm’s economic review for 2nd Quarter of the year showed that over the 12 months to March 2010, the economy grew by 7.5 percent, the first time that it has shown positive growth over a 12 month period since the final quarter of 2008.

“The recovery in growth has been largely driven by the mining sector, which grew by 10.1 percent over the year to March,” said the Bifm Economic Review.

In the first three months of the year, exports averaged P2.6 billion per month, compared to P1.3 billion in the first quarter of 2009, which compares well with pre-crisis monthly average exports of around P2.7 billion in 2007 and 2008.

It added that the non mining private sector did less well, with overall growth falling to 5.5 percent while manufacturing contracted by 6.4 percent, finance and business services output was more or less flat with only 0.3 percent growth.

“The recovery has been most striking in respect of diamond exports, which, of course, fell to very low levels in the first months of 2009- so that recovery is off a low base,” the review added.
This recovery reflects higher diamond production and sales volumes. Production at Debswana mines is said to be over 60 percent, which explains the figures.

Key Botswana markets including the U.S and European countries are slowly coming from their worst recessions although larger share of the diamonds are consumed by the Asians.

Other exports have enjoyed a share of volumes including meat, gold, vehicle parts and machinery equipment. Botswana make close to P500 million on beef exports to the EU, while gold goes mostly to the Chinese markets.

“The main problem area has been textile and garment exports, which fell by 55 percent in the first quarter of 2010 compared to same period in 2009,” Bifm added.

The sluggish performance follows the closure of Botswana’s largest garment manufacturer and exporter, Caratex taking along 5, 000 workers.

On the flipside, Bifm said although exports have picked, this does not mean that all is well on the foreign trade front.
“Exports have recovered from the low of early 2009, but in the meantime imports have been growing steadily.”

The Economic Review stated that for most of 2007-08, monthly exports of P2.7 billion comfortably exceeded imports, but by the first quarter of 2010, monthly imports averaged well over P3 billion.
“Notwithstanding the export recovery, therefore, the balance of trade has remained in substantial deficit,” Bifm revealed.

Despite, the recovery, the global economy of which Botswana is linked is not out of the woods yet.
Problem are beginning to surface on how best to manage the recovery especially on balancing public debt levels and withdrawal of fiscal stimulus. This problem is inherent in the UK economy that recently announced a budget with major cuts including school projects that critics say will affect the recovery.


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