Renowned economic experts have described Finance Minister Kenneth Matambo’s growth projections of the local economy as “overly optimistic” and “too ambitious”.
Matambo used the Monday afternoon budget speech to announce that government anticipates the economy to grow by 4.2 percent this year after slowing to one percent. The downward trend in 2015 has been attributed to falling diamond production as well as water and power shortages during the past year. Responding to Matambo’s Monday speech, Econsult Botswana Managing Director, Dr. Keith Jefferies said that that the economy will grow by two percent in 2016, a figure that is in sharp contrast to the 4.2 percent that Matambo is expecting.
“I am bit surprised that they are projecting such a big increase, my projection is an increase of about 3.6 percent next year, their number is quite so big,” said Jefferies outside parliament.
Another economist, Moatlhodi Sebabole, who is Head of Research at RMB Botswana, an arm of First National Bank shared Jefferies’s sentiments adding that the local economy will not grow by more than three percent in 2016.
“The water and electricity crisis will still be here so we do not see the economy growing beyond three percent. Where will such big growth come from?” he asked.
Matambo had earlier in his speech noted that the Economic Stimulus Package (ESP) introduced by government as well as a recovery in the global economy would help lift Botswana’s growth this year.
“These growth forecasts are based on the expected moderate recovery in the global economy, as well as the impact of the domestic policy initiatives such the Economic Stimulus Programme.”
However Jefferies maintains that regardless of the diamond market showing signs of recovery what is important to consider at the moment is that the market is pulling through a lot of diamond stock pile.
“De Beers and Debswana sold a lot less diamonds than they mined so even if the market recovers, the extra sales will come from stocks and not necessarily from extra mining,” warned Jefferies.
The latest estimates from Statistics Botswana indicate that, the domestic economy declined by 3.5 percent in the third quarter of 2015. As a result, the growth estimate for 2015 has been revised downwards from 2.6 percent to one percent. This compares to the growth rate of 3.2 percent recorded in 2014. Matambo on Monday admitted that the contributing factors to the slow growth in the domestic economy in 2015 were the mining sector, which declined by 14 percent in 2015, due to the reduction of diamond production. At the same time, the Water and Electricity sector also registered a decline of 104 percent, due to continued water and electricity supply challenges. Growth in other non-mining sectors is also estimated to slow down during the year, reflecting the effect of the water and electricity shortages on domestic economic activities.
Meanwhile government revenue is set to decline by 6.5 percent to 48.4 billion pula in the coming year, while expenditure is forecast at 54.4 billion pula. The proposed Ministerial Recurrent Budget for 2016/2017 financial year on the other hand amounts to P36.99 billion, an increase of P0.29 billion or 0.8 percent compared to the current year’s original budget of P36.70 billion. At the same time, Matambo has proposed a total development budget of P14.82 billion for the financial year 2016/2017.