According to the World Bank’s bi-annual analysis of African countries, Botswana’s economic resilience is slipping in her response to the commodity shock, difficult economic conditions as well as to the adequacy of policy response.
This finding is depicted in the 2017 World Bank report titled ‘Africa’s Pulse’ which categorised 45 Sub Saharan African countries into four groups based on the comparison of their average annual growth rates between 2015 and 2017. Other resource abundant economies demonstrating the same reaction include South Africa, Nigeria, Zambia, Malawi and Chad.
“The latest data reveal that only seven countries are seeing growth rates above 5.4 percent in 2015ÔÇô17. The seven countries exhibiting resilience are C├┤te d’Ivoire, Ethiopia, Kenya, Mali, Rwanda, Senegal, and Tanzania. These countries house nearly 27 percent of the region’s population and account for 13 percent of the region’s total GDP,” says the report.
It adds that the difficult economic conditions facing African countries in 2015 and 2016 have taken their toll on the economic resilience of the region. In its earlier analysis the report had mentioned Benin, Cameroon, the Democratic Republic of Congo, Mozambique and Togo as having being resilient but are now less so.
The regression in Mozambique, for example, is attributed to the rapid deterioration of the country’s debt position, which has eroded investor confidence, sharply depreciated the currency, and prompted a tightening of monetary and fiscal policy whereas Congo reflects declining mining production and a fall in investment spending, combined with domestic political uncertainty.
The benefit of resilience to the countries, the report says, is that they experience robust and broad based growth.
“Our previous analysis found that these countries generally have better macro-economic management, and recent evidence continues to support this finding,” it says.
These countries are said to be characterised by lower size of debt relative to GDP which averaged about 40 percent in 2016 compared to the higher ratio of 54 percent of other countries and lower inflation which averaged 4 percent and 5.8 percent in 2015 and 2016 respectively.
The countries as indicated also managed to spend wisely by containing non-priority expenditure as well as maintaining an effective spread of revenue which allowed them to build fiscal muscle for investment and social spending.
Botswana is shown to be falling behind its size of debt relative to GDP remains favourable at 20 percent, which is half of the average 40 percent mentioned. Its inflation has for the past year also remained within medium term range of 3 percent to 6 percent as set by the Bank of Botswana.
The country’s spending, on the other hand, cannot be lauded. Its challenge of weak implementation and monitoring processes means that it struggles to limit wasteful spending hence betraying its spending rule of doing more with less.
The Sub Saharan region, says the report, is seeing recovery of growth in 2017. “Sub-Saharan Africa is seeing a recovery of growth in 2017. Rising commodity prices, strengthening external demand and the end of the drought in several countries are among the factors contributing to the rebound. Prices of most commodities continued to rise in early 2017, from their lows in early 2016,” it says.
This recovery estimated at 2.6 percent contrasts the sharp decline of 1.6 observed in 2016. At 1.6 percent the growth had reached its worst outcome in more than two decades which was attributed to unfavourable external developments, with commodity prices remaining low, and difficult domestic conditions. Botswana’s is forecasted to grow by in 2017.