Botswana went into a technical recession between the months of last October and March as the country struggled to sell diamonds, but one economist believes the worst is behind as global economy is showing some green shoots.
“As the global economy recovers, we are seeing diamond exports rising. It has not fully recovery, but is a partial recovery,” Dr Keith Jefferis, Chairman of Bifm Investment Committee, said.
He was speaking this week at the Bifm Economic Review for the second of 2009 on Thursday.
“We have passed the worst: the diamond prices are still low, but they have recovered,” he added.
Bifm stated that it is clear that export performance improved during the first four months of the year, with exports much higher in March and April than in January and February.
Figures from Diamond Trading Company (DTC) have shown that sales have picked up and the cycle of weakness that began in the last quarter of 2008 has clearly turned.
In the fifth sight of the year, held in June, diamond sales were only around one third lower than in 2008 although for the full half year, the value of sales was 80 percent lower.
“Nevertheless, evidence suggests that the worst of the crisis may be over with regard to Botswana’s exports, even if recovery to historical levels may still be some way off.”
“However, the diamond industry still remains uncertain and volatile and we do not know how it will look,” it added.
For six months, the country struggled to sell diamonds, which led to several of producing mines closing.
Industry sources say there is side by side recovery, including the demand side, although the recovery is not very near to that of last year.
Although government had initially estimated that diamond exports would fall by 50 percent, they fell by close to 90 percent late last year.
The Central Statistics Office (CSO) and media reports showed that diamonds exports fell to nearly 90 percent between the months of August and November.
Last November, diamond sales recorded P371 million as the US economy experienced the worst recession in decades.
The recovery of the Botswana economy is largely dependent on the global economies like the US and China. The two countries are the major consumers of Botswana diamonds with the US buying over 45 percent of the country’s diamonds.
The world economy has continued its roller-coaster during the second quarter of 2009 with signs that the global recession is easing and forecasts seeing a robust recovery towards the end of 2009 into 2010.
There has been recovery in financial and commodity markets with global stock exchanges making gains since March. Copper/ nickel prices have risen by 50-70 percent in the first half of 2009.
Financial markets have begun to return to normality with liquidity returning to interbank markets and banks lending to each other again.
“There have also been substantial fiscal stimulus packages in the US, China and European countries, which has helped to restore confidence, demand and growth,” stated Jefferis.
However, Jefferis explained that while the global economy may no longer be in technical recession, it does not mean that the impact of recession has passed.
“News from the real economy is less optimistic than from financial and commodity markets.”