Saturday, February 4, 2023

Botswana economy dodges recession as GDP climbs up in Q3:2022

Botswana staved off the threat of recession in the third quarter of 2022 with a modest growth in the Gross Domestic Product (GDP) but the economy remained in choppy waters as high inflation driven by high fuel prices persisted throughout that year, data from Statistics Botswana (SB) shows.

In the world of economics, a recession occurs when an economy experiences two consecutive quarters of shrinking GDPs.  In the case of Botswana, the real GDP expanded by 7.4 percent in the first quarter of 2022, before slowing to 5.8 percent growth in the second quarter, and picked up to 6.3 percent in the third quarter.

According to Statistics Botswana’s latest GDP data report, GDP growth in the third quarter was anchored by the water and electricity sector which experienced a significant boost, with growth of 35.1 percent. The diamond trade also saw a substantial increase, rising by 28.5 percent. All other sectors of the economy averaged 1.9 percent of growth, except for the agriculture sector which grew by 0.4 percent.

A breakdown of the of the top contributors to  the local economy pegs mining and quarrying at 18.5 percent while the public administration and defence sits at 16.3 percent, wholesale and retail at 10.8 percent, construction at 10.6 percent, and wrapping up the top five list is manufacturing sector at 5.5 percent.

The Finance ministry expects GDP to grow by 4.2 percent this year, lower than the 12.5 percent growth recorded last year. From 2017 to 2021, Botswana’s economic growth rate averaged 2.8 percent over the five year period. The Finance ministry officials say the economy needs to grow by at least 5.7 percent annually for the country to move from middle income to high income status by the year 2036. However, the domestic economy remains vulnerable to external shocks due to its narrow economic base. The central bank has in the past said that a more successful transition and adaptation to the digital economy has the potential to cure the perennial economic challenges of Botswana, namely, narrow economic base, unemployment and unequal distribution of income.

In 2020 the Bank of Botswana said that the ICT sector has been acknowledged as a priority area in the structural transformation and policy reform agenda for the local economy. The bank cites the National Development Plan 11 (NDP11), the Economic Recovery and Transformation Plan (ERTP), and the Reset Agenda as part of the government of Botswana’s grand plan to advance the country economically.

The Digital Transformation Strategy (SmartBots), a proposition to enhance adaptation of technology, digitalisation and to enhance public service delivery is said to also be aiming at accelerating the country’s transition to a knowledge-based economy. The Digital economy is taking the space, turning around the economies of countries across the world. In particular, the term “digital economy” refers to the use of information technologies in the production of goods and services, as well as in their marketing and consumption. This term highlights how industry takes advantage of technology to create new products and services or transforms existing ones. Global trade stats places its value at $11.5 trillion, and it is reported to be contributing 15.5 percent of global GDP, which has grown two and a half times faster than global GDP over the past 15 years. However, a United Nations Conference on Trade and Development report says many developing countries, consumers and businesses have not capitalized on pandemic-induced e-commerce opportunities due to persistent barriers. In Botswana, these barriers include over-reliance on cash, poor digital skills among the population and governments’ slow implementation of policies that directly affects e-commerce.

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