Botswana’s economy rebounded in the second quarter of the year at a higher pace last seen five years ago, making the quarter the strongest as most sectors of the economy were on an upward swing.
GDP increased 2.4 percent on a quarterly basis after contracting 1.5 percent in the first quarter. The second quarter growth is the largest since 2013 and 26 percent higher than growth rate recorded in the prior year corresponding period. On a year-on-year basis, the economy expanded 5.3 percent, up from the 4.8 percent recorded in the previous quarter of the year. This was the highest yearly growth in any second quarter since 2013.
The economy expansion in the second quarter was jump-started by 8.8 percent growth in Trade, Hotels and restaurants. Statistics Botswana attributes the growth in this sector due to increase in real value added of wholesale, retail trade, hotels and restaurants as inflows from the positive performance of downstream diamond industries trickled to the sector.
The mining sector also boosted GDP with 7.4 percent growth mainly on the back of the value added by diamonds, the mainstay of the economy. Diamond production in carats grew 6.4 percent in the second quarter of 2018 compared to 12.9 percent surge in the corresponding period of 2017. Moreover, diamond prices continued to show improvement during the second quarter of the year.
Growth in the finance and business services industry picked up at 6.1 percent spurred by the rise in value added of business services, real estate and banks. Earlier this year Bank of Botswana reported that business confidence was on a high, while commercial banks continue to rake in profits in the latest reporting period.
Transport and communications advanced 5.9 percent fuelled by growth in value added in post and communications, road and air transport. Botswana Post this year reported profit for the first time in 10 years while Botswana railways revenue keeps on growing year on year since the reintroduction of the passenger train 2016.
The water and electricity sector was a blight spot as output suffered, resulting in a decrease of 7.4 percent. Delays in construction projects in electricity and water have been flagged as downside risks to economic growth.
Despite improved GDP growth in the second quarter, the country’s ministry of Finance and Economic Development last month trimmed projected GDP growth for 2018 from 5.3 percent to 4.5 percent. The ministry did not specify which sectors will slow down the economy. However the finance ministry added that the forecast growth of 4.5 percent this year would be partly dependent on a continuous rebound in the global diamond market and stability in the supply of power and water.