Covid stain remains on economy despite rebound
Mbongeni Mguni | Monday July 18, 2022 06:00
Real Gross Domestic Product (GDP) increased by seven percent year-on-year in the first quarter of the year, compared to one percent over the same period last year, according to data released recently by Statistics Botswana.
The growth came after a strong rebound of 11.4% in the economy in 2021.
The resurgence has been led by the mining sector, particularly diamonds, as well as generally improved performances across the non-mining sector owing largely to the relaxations of the restrictions imposed in 2020 in response to the pandemic’s outbreak.
Ba Isago University economics lecturer, Lovemore Taonezvi told BusinessWeek that the latest figures indicated that the economy was on a positive trajectory, recording the fifth successive quarter of expansion between January and March this year.
However, most sectors of the economy remained in the shadow of the pandemic, he said.
“The first quarter figure alone is not enough to tell whether the economy has recovered to pre-COVID levels since the calculation of this figure is based on the growth rate of the first quarter of 2021 when economic activity was generally low due to COVID-19 containment measures put in place by the government,” he said this week. “However, a comparison of the real value-added growth rates of various economic activities pre-COVID, that is the first quarter of 2019 and post-COVID which is the first quarter of 2022, shows that out of the 17 main economic activities recognised by Statistics Botswana, only four of them have exceeded the pre-COVID-19 growth rates while growth rates for the rest of the economic activities are still a far cry from their pre-COVID levels. “This means overall economic activity is still below the pre-COVID levels and this is also corroborated by unemployment rates which are still above their pre-COVID levels.”
The four sectors which have exceeded their pre-pandemic growth rates are Mining and Quarrying, Manufacturing, Accommodation, and Food Services as well as Public Administration.
Mining and Quarrying in particular has been the mainstay of the rebound, expanding by nearly 30% last year, compared to a contraction of 27% in 2020. The diamond traders’ sector recorded 78% growth last year, following a contraction of 37% in 2020.
Analysts have noted that because much of the record growth in 2021 was around mining and diamonds, the overall growth figures have masked the fact that other sectors of the economy have not yet returned to their pre-pandemic growth rates.
Taonezvi told BusinessWeek that the first-quarter growth was part of the COVID-19 rebound and not a reflection of full stabilisation across the different sectors.
“Although there are some elements of stabilisation largely in the area of Mining and Quarrying which has been accounting for a greater portion of the high growth figures Botswana has been registering post-COVID-19, the performance of most sectors of the economy is still below pre-COVID levels,” he said.
The Finance ministry expects the local economy to expand by 4.3 percent this year, although authorities are increasingly concerned by a global slowdown caused in part by geopolitical tensions in Eastern Europe, associated market upheaval and prevailing high inflation which can be traced back to the fallout from the COVID-19 impact.