Monday, June 1, 2020

Botswana’s economic growth after COVID-19 will frustrate jobs creation, High income status mission – IMF

Economic growth in Botswana is expected to pick up in the near-term mostly driven by the mining sector. Yet, the International Monetary Fund has said over the medium term, absent bold fiscal and structural reforms, the domestic economy growth will remain around 4 percent. 

This past week, and following the outbreak of COVID – 10 global pandemic over the past three months, the IMF has however cautioned that the growth will be insufficient to achieve Botswana’s objectives of reducing unemployment and transitioning to high-income status. 

Botswana’s unemployment rate is estimated at over 20 percent and is rated in the top three unequal nations in the world. Despite this, the country has aspirations to become a high-income country by the year 2036. 

The IMF says Botswana’s economic outlook is now subject to significant downside risks, including potential disruptions from COVID-19, most of which will affect Botswana through diamond and SACU revenue. 

“Over the medium and longer term, Botswana could also be affected by climate change”, reads part of the IMF statement.

The IMF Executive Directors have also noted that Botswana’s economic growth slowed in 2019 following a contraction in diamond activity and a severe drought. 

Still in 2019, expansionary fiscal policy in the face of persistent lower diamond and trade revenues has widened the country’s fiscal deficit, eroding buffers and weakening the external position. With the outlook subject to downside risks, IMF says there is need to rebuild buffers to guard against future shocks, including from a global growth slowdown, coronavirus-related spillovers, and climate change as well as natural disasters. 

“Reforms to facilitate structural transformation and diversify the economy will be crucial to promote stronger, sustainable, and inclusive growth”, said IMF on Friday.

As COVID – 19 spreads and its global patient count and death toll keep growing, economists across the globe are now slashing the once-rosy expectations for global growth in 2020. 

The highly infectious coronavirus has rapidly spread around the world, disrupting global trade and travel, and battering stock markets. 

In Botswana early indications are that for the four months since its first case it has had an acute impact on a relatively narrow set of industries in Botswana. 

Kgori Capital – a local asset management firm based in the capital Gaborone says the mix of shocks will probably result in a technical global recession. 

Kgori’s Chief Investment Officer – Alphonse Ndzinge says the intensification of Coronavirus containment measures such as rising social distancing, the rising health and economic uncertainty, the continued financial market turmoil and the unprecedented oil price collapse could leave global growth close to zero or even slightly negative in 2020. 

Ndzinge’s projection of a possible recession in 2020 is centred around the fact that since 1980, annual global growth has only been negative in 2009 and only below 1.0 percent in 1982. The last global recession was registered in 2008/09. 

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