Wednesday, June 23, 2021

Botswana’s economy contracts by 6%

The findings of the latest Gross Domestic Product (GDP) performance by Statistics Botswana for December 2020, show that the real economy declined by 6.0 percent during the period under review, compared to an increase of 3.1 percent in the same quarter of 2019. 

This contraction in the domestic economy was observed across all sectors except Government, Agriculture, Water & Electricity and Social & Personal Services. The unfavorable performance of the economy was mainly due to the impact of measures that were put in place to combat the spread of the COVID-19 pandemic.

The nominal Gross Domestic Product) for the third quarter of 2020 was P44, 671.4 million compared to a revised P36, 882.2 million registered during the previous quarter. This represents a quarterly increase of 21.1 percent in nominal terms between the two periods. During the quarter under review, Trade, Hotels & Restaurants became the major contributor to GDP by 18.7 percent, followed by General Government, Finance & Business Services and Mining & Quarrying by 17.6, 15.6 and 9.5 percent respectively. The contribution of other sectors was below 7.5 percent, with Water & Electricity being the lowest at 1.7 percent.

How each sector scored in Q3

The General Government sector increased by 2.5 percent in real value added compared to 3.6 percent during the corresponding quarter of 2019. In response to the global COVID-19 pandemic, many governments implemented a wide range of support measures to mitigate its impact on the economy and society. The positive performance is mainly attributed to the increased number of personnel brought in to combat the spread of the pandemic for example recruitment of teachers, Safety and Health Employees (SHE) and other temporary employees across Ministries.

The Agriculture industry increased by 3.1 percent in real value added during the third quarter of 2020, relative to a contraction of 1.4 percent registered during the same quarter of 2019. The main driver of the improved performance stems from an increase in real value added of Horticulture, Crops and Livestock farming sub-industries, which posted growth of 2.6, 2.0 and 1.3 percent respectively.

The report further shows a decline in the real value added of Mining by 15.2 percent mainly influenced by Diamond and Soda Ash real value added. Diamond production in carats went down by 15.3 percent while Soda Ash production in tonnes decreased by 53.1 percent. 

The poor performance of the diamond sub industry is attributed to the reduction in the production due to weak demand from global markets. “Diamonds are luxury goods and therefore are bound to fluctuate due to the appetite of reliable customers as the world is highly affected by the outbreak of the Coronavirus pandemic. With regard to Soda Ash, the plant was put under care and maintenance,” reads the report. 

As for the Water and Electricity-value added at constant 2006 prices for the third quarter of 2020 was P368.7 million compared to P 253.9 million registered in the same quarter of 2019, recording an increase of 45.2 percent. Even though the industry recorded the positive growth, its contribution to the economy still remained the lowest. 

In the third quarter of 2020, Electricity recorded a value added of P87.4 million compared to P26.8 million registered in the same quarter of 2019, leading to a significant growth of 225.8 percent. The local electricity production increased by 29.2 percent while imports of Electricity dropped by 22.9 percent during the quarter under review, hence an increase in real value added. Morupule A power station was operating at full capacity.

Trade, Hotels and Restaurants real value added declined by 15.3 percent in the third quarter of 2020 compared to an increase of 5.3 percent registered in the same quarter of the previous year. The reduction is largely attributed to a decrease of 46.9 percent in real value added of the Hotels & Restaurants sub-industry. The suspension of air travel occasioned by Covid-19 containment measures impacted on the number of tourists entering the borders of the country and hence affecting the output of Hotels and Restaurants industry. COVID-19 restriction measures resulted in reduced demand for leisure and conferencing activities, as conferences are held through virtual platforms.

Nevertheless, increased economic activities were reported for Wholesale and Retail trade by 8.5 and 4.6 percent respectively. The positive growth in the Wholesale value added is due to improved performance of downstream diamond industries during the quarter under review. Food and Non-food retailers showed a strong performance post the Q2 2020 which was hard hit by the implementation of strict COVID-19 pandemic protocols.

The Manufacturing industry recorded a decline of 5.3 percent in real value added during the third quarter of 2020, compared to a growth of 3.0 percent registered in the corresponding quarter of 2019. 

The contractionary performance in the industry is observed across the majority of the sub- industries except the Textile and Clothing sub industry. 

The reduction is attributed to a substantial decline in the sub-industries of Beverages and Tanning & Leather Products by 31.4 and 21.8 percent respectively. The production of Beverages (Chibuku and Beers) declined by 32.1 percent due to the alcohol ban for a period of two weeks in August 2020 in order to combat the spread of the COVID-19 virus.

The Transport and Communications value added decreased by 9.0 percent in the third quarter of 2020, compared to a 5.1 percent increase recorded in the same quarter of the previous year. The negative performance of the industry was mainly attributed to the decline in real value added of Air Transport by 94.7 percent, followed by Tour operators & Travel agents and Rail by 9.0 and 0.8 percent respectively. 

The significant reduction in Air Transport services was due to the suspension of air travel occasioned by Covid-19 containment measures. However, a strong performance was observed in the Information and Communications industry which recorded a growth of 7.0 percent in real value added for the third quarter of 2020, compared to an increase of 6.5 percent registered in the corresponding quarter of 2019. The strong performance is attributed to the high demand for data services and internet connectivity from educational institutions, Government, businesses and households during the reporting period

The Finance and Business Services industry registered a negative growth of 1.0 percent due to the decline in the real value added of Business Services and Real Estate by 3.9 and 4.8 percent respectively. 

In spite of this, a resilient performance of the industry was reflected in both Banking and Insurance sub- industries that recorded positive growths of 4.0 percent and 2.0 percent in real value added respectively. Total loans to Government, Businesses and households increased by 4.4 percent during the quarter under review.

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