Saturday, September 26, 2020

Global financial crisis worries exporters

Bank of Botswana’s business expectation survey for 2009 firmed against the previous ones but the international financial crisis and the input costs dampen the mood for the exporter as the global economy experienced sluggish demand.
The survey, which is the eleventh, covered 100 business operations from agriculture, mining, manufacturing, water and electricity, construction, trade transport, financial and business services sectors.

According to the survey conducted between September and November 2008 there was a strong response of 65 percent against the previous one that attracted as much as 57 percent.

Further, it indicated that the confidence level firmed during the second half of last year ÔÇô rising to 82 percent as against 65 percent during the corresponding period in the previous year. However, it indicated that confidence among exporters was slightly lower compared to that of local traders which was at 82 percentÔÇöreflecting the delayed impact of the international economic slowdown on the domestic economy.

“There was continued optimism regarding the general prospects of the economy, with real GDP expected to grow by six percent in both national accounting years of 2007/2008 and 2008/2009.
“This is largely unchanged from the previous survey, despite CSO having released estimates that growth in 2007/08 was lower at 3.3 percent,” the report said.

The general confidence as pointed by the respondents was largely ascribed to the steep fall in the international crude oil prices; however, it did not factor in the rising costs of food.

Since the tanking of crude oil prices in August last year government has tempered down with the pump fuel prices four times to the close of the year. However, the move coincided with a sharp rise in food prices and the worsening of the international financial crisis.

The gloomy global economic outlook was initially sparked by sub-prime mortgage lending that started in the United States before nailing the financial housesÔÇöincluding the banking sector.

The effects of that have spread wide across sectors and the globe and countries such as Botswana have been hit hard on the mining sector. The mining sector has been hit in all directionsÔÇö such as ÔÇô share price on the stock exchange and sluggish demand that has resulted in retrenchment, unpaid leave for employees and stockpiling of their production. The effects of that are likely to hit the local banking sector, which is exposed in terms of consumer lending such as household loans, credit cards, car loans and mortgages.

“While the period during which the survey was conducted coincided with a rapid deterioration of the outlook for the global economy, the likelihood of a large negative impact for Botswana only became closer to the end of 2008.

“The impact of the rapidly deteriorating outlook for mineral export will, therefore, only materalise in the next survey, in March 2009,” the report said.
“The generally positive economic outlook is supported by the proportion of firms 82 percent which, at the time of the survey, regarded business conditions as generally satisfactory. However, this fell, somewhat, to 71 percent going into 2009, which may be a sign that there was already some unease that the state of the economy could worsen,” the report added.

The report further cautioned on the likelihood of an increase in input costs and also points to a possible spike in utility costs mainly from the electricity side part of things. Botswana and the rest of the region have been subjected to power outages prompted by aging power stations and the diminishing supply from the traditional sources.

“Expectation of higher utility prices is consistent with the cost of increasing electrify supply, while the anticipated upward pressure on costs of raw materials and other inputs (construction) may reflect concern about possible scarcity due to simultaneous undertaking of large scale projects in the region.

It added: “The level of investment spending is currently strong, and is expected to continue into 2009. This is in exception of investment in new buildings, which could indicate that either capacity is sufficient or possibly shortage of land is a constraint,” the report said.

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