Monday, June 1, 2020

GLOBAL TRADE WAR, A THREAT TO BOTSWANA ECONOMY?

Although 2019 started reasonably well in terms of domestic economic growth, there are some worrying clouds on the horizon. This include the ongoing process of the exit of Britain from the European Union popularly known as BREXIT.

The trade war between two global power houses – China and US relating to tariffs has also been identified as key threat to small economies such as that of Botswana who rely on exporting minerals to the global economic powerhouses.

Economic pundits have recorded a weakening global diamond market during 2019. Botswana is a key player in that market as it produces more than half of the world diamonds.

The uncertainty around trade has weighed down significantly on global growth leading to institutions like International Monetary Fund (IMF) revising down their expectations for global growth to 3.3 percent.

Local banker – Barclays Bank Botswana economist – Naledi Madala says in response to slowing growth, global policymakers continue to ease monetary policy, particularly in emerging markets where several central banks have moved to cut interest rates in order to support growth.

“Consumers and businesses are increasingly feeling the impact of these tariffs as they weigh on household spending and investors decisions, exerting downside pressure on growth”, said Madala.

In Botswana, Consumer prices averaged 3.4 percent in the first quarter of the year, higher than the 3 percent recorded in the same quarter last year, and inflation is projected to rise in the short term, revealed Bank of Botswana in its latest Monetary Policy Report.

Botswana’s latest inflation rate places it in the fifth position of Southern African Development Community (SADC) countries with low inflation rates, falling behind Mauritius, Seychelles, Swaziland and Mozambique. Out of the 54 African countries, Botswana is on the 28th position.

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