Friday, May 20, 2022

Second quarter GDP seen weakening

Botswana’s Gross Domestic Product (GDP) is expected to weaken in second quarter of the year as effects of the suspended public sector strike filter into the economy, a local stockbroking firm has suggested.

Motswedi Securities said in a Quarterly Economic Bulletin that companies that do jobs for government were affected, which had a ripple effect on the general economy.

“Looking ahead, we expect Q2 2011 GDP to weaken again due to the just suspended 2-month strike by Botswana’s civil servants which almost paralysed the economy amidst reports of rising bad debts and difficulties in servicing personal loans,” said the research note.

“Some small to mid-sized firms, which depends on government orders were also affected, with some facing serious cash flow problems, impacting negatively on their operations, and the country’s economic growth at large.”

At the height of the strike, BOCCIM expressed worries that there has been reduction in government orders for goods and services from the private sector, which has resulted in sales plummeting, potential closure of businesses, and job losses, specifically from SMME’s.

“For most companies, the government is their key client, and with the delays in payments businesses have encountered cash flow and creditor problems, including hindrances in their daily business operations,” it added.

Botswana’s GDP grew by 6.4 percent year on year, but contracted by 2.2 percent during Q1 2011 according to provisional data released by the Central Statistics Office.

The q/q decline was mainly due to lower output in mining (4.2 percent q/q), financial & business services (6.2 percent q/q) and general government (7.6 percent q/q). On an annual basis, the mining sector grew by 7.2 percent y/y, agriculture by 10.9 percent y/y, construction by 25.8 percent y/y and transport & communication grew by 12.6 percent y/y.

Botswana’s GDP grew by 6.4 percent y/y but contracted by 2.2 percent during Q1 2011, according to provisional data released by the Central Statistics Office.

The q/q decline was mainly due to lower output in mining (4.2 percent q/q), financial & business services (6.2 percent q/q) and general government (7.6 percent q/q). On an annual basis, the mining sector grew by 7.2 percent y/y, agriculture by 10.9 percent y/y, construction by 25.8 percent y/y and transport & communication grew by 12.6 percent y/y.

“The decline in the q/q GDP growth is not surprising given the low confidence levels in the economy as shown by the Bank of Botswana confidence report which was released in June,” said Motswedi.
According to the survey, business confidence fell to 47 percent during H1 compared to a previous survey where 67 percent expressed confidence with prevailing business conditions.

The business community was also less optimistic about the country’s economic growth and expects a modest 2.1 percent y/y GDP growth in 2011, which is in sharp contrast to Finance Ministry projections of 6.8 percent y/y in 2011 and IMF projections of 6 percent y/y in 2011.

Motswedi added that although the economy is on the recovery mode, this has not yet filtered through to non mining sectors of the economy as shown by the lower GDP growth expectations among the business community.

It said the reduction in government expenditure has further affected the growth of the non mining sector which relies heavily on government.

“Against this background, it is imperative to speed up the country’s diversification process to promote sustainable growth.”

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