Saturday, January 28, 2023

Economy records steady growth in Q3:2022

The Botswana economy grew modestly in the third quarter, parring off fears of looming recession that has been associated with other economies, data released by the country’s statistics showed.

A recession occurs when the economy experiences two straight quarters of shrinking gross domestic product (GDP) – which measures the value of all goods and services produced within a country within a year. GDP is a key economic indicator of the size and health of a country’s economy.

By that definition, Botswana’s economy has defied expectations that it would slide into a recession. The real GDP – which is adjusted for inflation by using 2016 as base year for prices – increased by 4 percent in the third quarter, picking up from the second quarter’s 1.4 percent decline. The GDP grew by 6.6 percent in the first quarter.

On annual basis, the real GDP expanded by 7.4 percent in the first quarter of 2022, before slowing to 5.8 percent growth in the second quarter, and picked up to 6.3 percent in the third quarter, according to Statistics Botswana’s latest GDP data report.

The top five major contributors to Botswana’s P200 billion economy are; mining and quarrying at 18.5 percent of GDP, followed by public administration and defence at 16.3 percent, wholesale and retail at 10.8 percent, construction at 10.6 percent, and manufacturing at 5.5 percent.

GDP growth in the third quarter was anchored by the water and electricity sector which experienced a significant boost, with growth of 35.1 percent. The diamond trade also saw a substantial increase, rising by 28.5 percent. All other sectors of the economy averaged 1.9 percent of growth, except for the agriculture sector which grew by 0.4 percent.

The growth rates for the three quarters of 2022 means the country’s average growth rate is 3 percent, pending the release of the fourth quarter data. The ministry of Finance has been projected GDP to grow by 4.2 percent in 2022, significantly lower than the 11.8 percent growth in 2021. Botswana’s GDP contracted by 8.7 percent in 2020, the deepest contraction in more than two decades as the diamond industry floundered amid the outbreak of COVID-19 which disrupted business activities.

But even still, the economy was already losing steam as the growth pace was decelerating. GDP growth averaged 7.1 percent from 2005 to 2007, then slowed to an average of 6.4 percent during 2010 to 2012 period. This was followed by an average of 4.6 percent in 2013 to 2015, and 3.9 percent between 2016 and 2018, respectively. From 2019 to 2021, the GDP averaged 3 percent growth.

Government economists say the economy needs to grow by at least 5.7 percent average annual growth rate, which is the rate required to move Botswana from upper middle income to high income status by 2036. However, the economy remains vulnerable to external shocks due to its narrow economic base.

Diversifying the economy to reduce the high level of dependence on mining has long been a central objective of the government, with emphasis to shift towards growth led by the non-mining private sector to wean of the economy’s dependence on mining and government spending.

The contribution of mining to GDP fell between 2016 and 2021, although the share of government spending and contribution rose. The contribution of the non-mining private sector jumped from 53 percent to 59 percent of GDP over this period. However, the main driver of this change was a sharp decline in diamond rather than robust growth of the non-mining private sector. Overall, the government sector has been the main driver of growth over this period.

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