Wednesday, February 12, 2025

Botswana’s tough road to economic recovery

The Botswana economy crawled out of recession in the first quarter as government continues to spend in efforts to stimulate the sluggish economy that has been weighed down by slow rollout in vaccines amid surging COVID-19 infections and deaths.

Gross domestic output (GDP), the broadest measure of economic output, grew by 4.6 percent in the first quarter of the year, Statistics Botswana said, up from the 0.2 percent contraction in the fourth quarter of 2020. On annualised basis, real GDP growth was 0.7 percent in first quarter of 2021, a major improvement from the 4.6 percent contraction registered in the previous quarter.

“The improvement in the first quarter 2021 GDP, reflected continued efforts to reopen businesses and resume activities that were postponed or restricted due to the COVID-19 pandemic,” Dr. Burton Mguni, the Statistician General, said.

The improvement in economic output was largely anchored by major expenditure by the government, with public administration and defence being the major contributor to GDP by 18.4 percent, followed by wholesale and retail which advanced by 11.4 percent.

The quarterly growth will be a relief to the government, but a steeper road lies ahead as the economy seeks to recover from the worst economic contraction since independence. The Botswana economy lost as much as P16.7 billion last year as output shrank on the wake of the deadly Covid-19 outbreak. Real GDP decreased by 8.5 percent in 2020, the deepest annual economic contraction since 1966.

Though the retreat in economic activity is largely attributed to Covid-19 containment measures, Botswana’s economic cogs were already grinding slowly before the pandemic, creating extra pressure to the nation’s ballooning budget deficits and structural problems such as a poorly diversified economy and the soaring jobless numbers.

From 2010 to 2018, the GDP had an average growth rate of 3.7 percent, reflecting a gradual decline in economic growth over the ten-year period. GDP growth further slowed to 3 percent in 2019, down from 4.5 percent recorded in 2018. 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 revival in GDP growth in the first quarter of 2021 was largely anticipated given the low base effect, but yet even this growth remains fragile as economic experts differ on the level of recovery. The country’s ministry of Finance and Economic Development (MFED) projects that real GDP will expand by 8.8 percent in 2022, higher than the 8.3 percent put forward by the International Monetary Fund (IMF). The top credit ratings agency Moody’s expects this growth to be lower at 6.5 percent.

The projected economic growth is premised on fast vaccine rollout, rebound in mining industry and gradual normalization of domestic economic activity. However, the economic growth might be hampered by prolonged containment measures as the country with roughly 2.5 million in population continues to experience delays in acquiring vaccines, which the country desperately needs amid a surge in infections and deaths.

The delta variant of coronavirus this year has caused cases in Botswana to rise 107,000 and the country has since registered 1,600 deaths, with almost occurring in the first six months of the year. The government has spent $19.2 million on procuring vaccines for much of its population but has yet to receive a large portion of ordered doses. So far, the country has fully vaccinated only 125,000.

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