The process of rebasing the Gross Domestic Product (GDP) data by Statistics Botswana could lead to significant changes to the recorded size of the economy, a recent economic review has suggested.
Bifm Economic Review for the 1st Quarter 2011 has revealed the rebasing of the data series (the base is currently 1993/4, and is now outdated), could see the numbers differing to the current ones.
“The results of these revisions, which should be published later in the year, are likely to have an impact on several aspects of the data,” the review prepared by Dr. Keith Jefferis Chairman of Bifm Investment Committee stated.
It suggested there could be significant changes to the recorded size of the economy, the relative sizes of different economic sectors, and in particular in economic growth rates, which when revised could turn out to be quite different to the numbers currently being published.
This will reverse the published figures that have shown gains made by the economy which is slowly recovering from the global economic recession.
Data by Statistics Botswana had shown that the economy grew by 7.2 percent in 2010, in contrast to a contraction of 4.9 percent in 2009.
This growth recovery was driven in part by recovery in the mining sector, although it was not the only driver as the fastest growing sectors were agriculture (mainly livestock) and construction, which both expanded by some 15 percent in 2010.
The revision of the GDP data undertaken by Statistics Botswana is standard practice internationally.
“However, the problem in Botswana is that the revisions are relatively infrequent, and as a result any errors in the GDP calculations can be compounded over a long period of time, resulting in the impact of revisions becoming potentially quite large,” added Bifm.
Meanwhile, Bifm praised the recovery in the global economy that has helped boost Botswana’s exports, which showed healthy growth in 2010, rising by 30 percent over the 2009 figures.
This was largely driven by a recovery of mineral exports, particularly diamonds, which grew by 43 percent in 2010.
Meanwhile, Bifm forecast that inflation will decline in the coming months, to just over 6 percent by mid-year, before rising somewhat in the second half of 2011.
Despite the forecast of declining inflation in the short-term, the inflation outlook has clearly deteriorated in recent months ÔÇô late last year it was expected that inflation would fall comfortably within the upper end of the Bank of Botswana’s 3-6 percent inflation objective, but now it appears that inflation will now remain above the upper limit during 2011.
Inflation has been on the increase in the first quarter of 2011, rising from 7.4 percent at the end of 2010 to 8.5 percent in February and March 2011.
Central Bank has however suggested it is unlikely to raise interest rates in response to short-term, temporary increases in inflation.
“Overall, the most likely course for interest rates during 2009 is to remain stable at current levels. However, if there are a sharp increases in international fuel or food prices, higher domestic electricity prices, or an increase in VAT, then an increase in interest rates becomes more likely,” noted Bifm.