Monday, January 25, 2021

Botswana technically not in recession, but heading for negative territory

Using the conventional definition of a recession whereby the real GDP growth is negative for two consecutive quarters, Botswana economy is still out of the woods, although this year will be difficult if the global economy does not recover.

According to latest ‘preliminary’ data from the Central Statistics Office (CSO), the Gross Domestic Product (GDP) growth for the fourth quarter of 2008 was 2.9 percent, which was higher than the same period in 2007.

However, the Bank of Botswana (BoB) this week said because the mining sector is down, the economy might be heading for a negative territory.

In a response to Sunday Standard questionnaire at a media briefing, the Bank’s Head of Research, Andrew Motsomi, said of the GDP numbers: “This still shows some level of growth. Technically, we are not in a recession yet.”

The Bank pointed out that the recession might also be offset by government ‘helping momentum’ to stimulate the economy.

“We do not have it (recession) yet,” added Central Bank Governor, Linah Mohohlo, adding that it is only the dominant economies, including the US, that are in a recession.

The US economy, which is the major consumer of Botswana diamonds (over 45 percent) is expected to contract by 2.8 percent; Europe, including the UK, by 4.8 percent while Japan, the second largest economy in the world, will contract by 6.2 percent.

Mohohlo added that economies around the world have come up with stimulus packages with expectations that they will work.

Economists have warned that normalcy could only come back to the global economy if the international financial markets are stabilised.

“It will also depend on the implementation of sustainable economic systems,” she noted.

Botswana, like the rest of the export-orientated countries, is hard hit by global economic recession, with a lower overall balance of payment being lower in 2008.

This will have a negative impact on the foreign exchange reserves that are currently P10 billion lower since the crisis and because of the fact that the country is now importing rather than exporting.

“What this means is that we are not adding to the reserves,” said Motsomi.

“It will have an impact on the level of reserves because of a lower level of production.”

Bank of Botswana assets were P68.9 billion at the end of 2008, of which foreign exchange reserves were P68.6 billion.

In Pula terms, the reserves rose by 17.2 percent from P58.5 billion in 2007 because of the depreciation of the currency against peers. However, they fell in US dollar SDR (a basket of currency representing the US dollar, Japanese Yen, Pound and Euro) terms by 7.1 percent and 4.8 percent respectively.

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