Botswana’s economy has failed to respond to fiscal and monetary policy interventions, operating below potential and growing at a sluggish pace, reveals data from the Bank of Botswana
According to the central bank’s annual report for 2019, Botswana’s diamond mining dependent economy has not responded positively to government interventions to stimulate the economy besieged by soaring unemployment levels and huge government budget deficits.
Last year’s gross domestic product (GDP), which measures the value of goods and services produced in the country, grew by 3 percent to P99.4 billion which was a drop from the 2018’s 4.5 percent. Nominal GDP, which uses current prices, advanced by 3.6 percent to P197.3 million, yet still lower than 2018’s 5.7 percent growth.
From 2010 to 2018, GDP rate on average grew by 3.7 percent, reflecting a gradual decline in economic growth over the ten-year period. At these rates, Botswana’s economy is said to be operating below potential output, which experts have suggested should be above 6 percent for the economy to create the much-needed jobs.
The country’s economic performance has been hampered by its reliance on the diamond industry which has faced challenges too in the same period. Growth in non-mining GDP also moderated, attributable, in large part, to the subdued performance of the downstream diamond industries, said the central bank report.
“Overall, the Botswana economy continued to operate below potential, notwithstanding expansionary monetary and fiscal policies. Of particular concern is the relatively high levels of unemployment,” the report said.
The central bank had projected the economy to grow by 4.4 percent this year but the advent of Covid19, the disease caused by coronavirus that broke out early this year, has changed projections.
“For Botswana, this pandemic poses added uncertainty and challenges given Botswana’s high vulnerability to external shocks, notably, diamond production and demand, tourism and possible disruption of imported supplies either from South Africa or through South African ports of entry,” BoB officials wrote in the report.