Economists have urged Botswana to have a renewed focus on increasing its export efforts to outside markets. This follows a forewarning from the International Monetary Fund (IMF) of the potential for adverse spillover from the expected slowdown in the South African economy this year.
The tone of the recent WEO is largely gloomy, focusing on the numerous threats to the improved projections for Botswana and most of the sub-Saharan region in 2012. According to the report, the major threat for Botswana and other southern African states will be the potential spillover of subdued growth in South Africa stemming from that country’s close integration with the crisis-ridden Euro area.
“Botswana has to diversify from its traditional markets and look for outside markets,” Keith Jefferies, an Economic analyst, said. Jefferies said spillover warnings are not much of a major issue but, instead, are South Africa’s weak economic growth that adversely affects Botswana and the region.
“Businesses should look for fast growing markets like China, or India as they have positive micro and macroeconomic trends,” he added. Jefferies said there is a lot of competition outside mining hence the country needs to grow its markets.
The IMF report stated that ripple effects of a slowdown in the South African economy could transmit to Botswana via any and all of the numerous trade, investment and monetary linkages between the two countries.
The report projects that Botswana’s real Gross Domestic Product will grow by 3.8 percent this year, up from the 3.3 percent forecast in the April edition of the same study. The October WEO also expects inflation to average 7.5 percent this year and the current account balance to be positive at 3.9 percent of GDP, pointing to stronger exports of goods, services and assets over imports, the report said.
Botswana’s economy is closely linked to the regional powerhouse, with South Africa supplying more than 70 percent of the country’s goods, while the Pula’s value is linked via a currency basket to the Rand, said the report.
The IMF also said the risk of higher prices to net food importers like Botswana would erode foreign savings at both national and government level.