As the global economic situation gets back to normal, analysis by the African Development Bank (AfDB) shows that Botswana experienced mixed fortunes during the high noon of the Covid-19 pandemic.
Continentally, Southern Africa economies were the hardest hit by the pandemic, contracting by 6.0 percent. Naturally, that contraction had a detrimental effect on Botswana’s economy. However, with the darkest phase of the pandemic yet having passed, Southern Africa experienced the largest recovery at an estimated growth of 4.2 percent in 2021. At 12.5 percent, Botswana’s recovery was the strongest in the region. The country was followed by Zimbabwe (6.3 percent), South Africa (4.9 percent) and Mauritius (4.0 percent). Southern Africa saw estimated GDP growth of 4.2 percent in 2021 as South Africa’s economy, which is the largest in the region, posted strong growth of nearly 5 percent, the highest since 2007, reflecting large fiscal stimuli. The Bank adds that this recovery of growth in the region was driven largely by rising prices and global demand for metals and non-metals and by vaccination rollouts.
Botswana and Mauritius were among the top-performing economies in 2021. AfDB says that both countries are projected to grow strongly, by 4.2 percent and 6.2 percent respectively in 2022. The current account may register a surplus in 2023, with the revival of the diamond and tourism industries. While unemployment may widen post-lockdown, well-targeted social programmes could mitigate it.
While the Bank says that Botswana’s GDP growth might be supported by the continued pickup in economic activity and diamond prices, a successful COVID-19 vaccine rollout, and full implementation of the Government’s Economic Recovery and Transformation Plan (ERTP), it also warns of possible headwinds. The latter include weaker diamond demand if the global economic recovery loses momentum, COVID19 variants, persistent drought, and effects of South Africa’s weak economic growth on Botswana’s exports and SACU revenues.
Africa’s real GDP growth is projected to decelerate to 4.1 percent in 2022, reflecting ebbing of base effects and uncertainties related to the persistence of the COVID-19 pandemic and the impact of the Russia–Ukraine conflict.
“The spill-over effects from the Russia–Ukraine conflict and related sanctions on Russia may cause a larger decline in global output than currently projected. A combination of low COVID-19 vaccination rollout and emergence of new COVID-19 variants may force countries to retain some restrictions. Other downside factors include heightened debt vulnerabilities, tight global financial conditions as inflationary pressures rise, the effect of the Russia–Ukraine conflict and related sanctions on Russia, climate and environmental risks, and other socio-political and security issues. Upside factors include faster vaccination rollout, a comprehensive resolution of debt problems, and policies to accelerate structural transformation and build economic resilience.”