Should we care at all about the recently ended 48th World Economic Forum (WEF)? The obvious answer is yes. It is precisely because Botswana is a small and open economy that is catching wind of what is to come in the global economy in 2018. Her economic makeup as a small and open economy means that external shocks are likely to significantly influence its domestic economic activity and therefore finding out what to expect sets the stage for her to put her affairs in order.
The Forum took place in Davos-Klosters, Switzerland under the theme “Creating a Shared Future in a Fractured World” between January 23 and 26, 2018, well in time before Botswana’s national budget speech is delivered. WEF attracts relevant leaders such as government officials, artists, civil society leaders, innovative entrepreneurs and CEOs of multinational companies from all sectors of global society to identify the best ways to address the world’s most significant challenges. It is from open forums such as WEF where economic ideas, global initiatives, industry trends and projections are dialogued and shared. It has proven relevant to Botswana given that the national budget speech every year without fail makes reference to global performance and outlook which comes top of the Finance Minister Kenneth Matambo’s economic review. Matambo’s overview of the global and regional projections set the tone for what happens in the domestic economy. The global economy in the previous year was described to be subdued and though the outlook was anticipated to be positive a measure of risk and volatility was in tandem with the optimistic stance. The Finance Minister will in the upcoming speech indicate whether the domestic economy either contracted or grew at the backdrop of the global economy conditions that prevailed.
Looking into the global economy in 2018 Chief Economist Nariman Behravesh at the consulting firm IHS Inc. and author of Spin-Free Economics shared a synopsis of what could be expected. In it he forecasted that in Sub-Saharan Africa, the big economies (Angola, Nigeria, and South Africa) will struggle to expand by more than 1 percent. “In 2017, the global economy recorded its best performance in six years. The stage is now set for sustained solid growth in the world economy in 2018. IHS Markit expects global growth of 3.2%, matching 2017’s growth rate, and well above 2016’s 2.5%,” he wrote. He further projected that derailing the global economy would require a large shock and while the list of such shocks is long, the probability of any of them doing serious damage is low. “Unfortunately, there is no shortage of risks facing the world economy. But most are low-level threats.” Behravesh signaled that the global environment is growth supportive.
One particular trigger close to Botswana’s economy is the price of commodities to which Behravesh mentioned that has constraints. He anticipates that geopolitical risks could be a source of upside pressures. The reliance of Botswana’s economy on a single commodity (diamonds) puts the country’s sustenance dependent on the movement and shape of the commodity prices. With constraints to the prices Botswana could continue to navigate the global economy with difficulty.