Despite the negative GDP numbers for the second quarter of the year, Botswana economy is not likely to go back to recession, but its growth is expected to be mild, analysts said.
The local economy contracted by 8.4 percent q/q during Q2/2010, reversing the 4.1 percent q/q growth achieved in Q1/2010 sending shock waves across the economy that it might take longer experience double dip.
However, the contraction is not surprising according to a local economist.
Gaotlhogwe Motlaleng, University of Botswana (UB) macroeconomist said it was not surprising that the GDP contracted in the second quarter looking at the nature of the product the country depends on.
“The main revenue earner is diamonds and this cannot be bought throughout the year. The consumption of diamonds is not going to go as the first quarter,” explained Motlaleng.
“What made the contraction is the nature of the product we sell. You can stock pile diamonds and they are a luxury,” he added.
Botswana diamonds are sold in rich countries of the U.S (45 percent), while others land in the newly-wed in Europe, India and China.
These key markets are currently experiencing recession blues and are finding it hard to come out of the worst downturn since the great depression.
Asked if the economy is likely to go back to recession, Gary Guma, an analyst with Motswedi Securities, said that it is unlikely.
“Not really, actually, the economy is improving,” said Guma.
He said looking at the figures, the economy will continue to grow year-on-year, but will have difficulties on quarterly basis.
Motlaleng pointed out that Botswana’s economic direction therefore is dependent on continuous growth globally.
Debswana, a 50/ 50 venture between Botswana government and De Beers, said its production has been improving steadily although still far from reaching our pre-recession production levels.
The company said its current estimates are to produce between 20-23 million carats for this year. Last year, it produced 17.7 million carats of diamonds lower than the 32.3 million carats produced in 2008.
The latest CSO figures also showed that SACU receipts also declined as there were no imports of raw materials as construction was buttered by lack of spending as it was in boom period.
“We believe the economy is still vulnerable to downside risks and we anticipate the reduction in government expenditure to negatively affect the non-mining sector, especially sectors dependant on household consumption,” Guma has said.
A “U” shaped recovery (instead of a “V” shaped recovery) in advanced economies, which are the major consumers of diamonds, might further weaken the diamond sector.
“As a result, the government needs to speed up the diversification of the economy away from the mining sector for sustainable growth,” he said.
Botswana economy is technically out of recession.
