IMF further cuts forecast for Botswana

Mbongeni Mguni | Monday October 17, 2022 06:00

Last October, the IMF’s eagerly anticipated report, the World Economic Outlook (WEO) projected the local economy would expand by 4.7 percent this year, before cutting this to 4.3 percent in April due to the effects of Russia’s invasion of Ukraine.

The figures for Botswana contained in the WEO update released on Tuesday are marginally lower than the 4.2 percent government expects for 2022–23. The Finance ministry had originally expected 4.3 percent growth but revised this last month citing downside risks such as a prolonged Ukraine war and global slowdown due to spiralling inflation and interest rates.

In its latest WEO, IMF researchers cut sub-Saharan Africa’s expected growth from 3.8 to 3.6 percent.

“Sub-Saharan Africa's recovery has been abruptly interrupted, as the worldwide slowdown, tighter global financial conditions, and a dramatic pickup in global inflation spill into a region already wearied by an ongoing series of shocks,” the researchers said. “Rising food and energy prices are striking at the region's most vulnerable, and public debt and inflation are at levels not seen in decades. “Against this backdrop and with limited options, many countries find themselves pushed closer to the edge.”

The WEO indicates that at 4.1 percent, the IMF’s projection for Botswana is the 18th highest in sub-Saharan Africa, with Seychelles leading at 10.9 percent, followed by Niger with 6.7 percent and South Sudan with 6.5 percent.

Regionally, however, the IMF’s forecast for Botswana’s growth this year is the highest, followed by Mozambique with 3.7 percent as well as Namibia and Zimbabwe whose economies are both expected to expand by three percent.

In the broader SADC region, however, Seychelles leads the pack, followed by Mauritius, and the Democratic Republic of Congo leads the pack with 6.1 percent growth.

SADC’s weakest performances are expected from Malawi with 0.9 percent growth, followed by South Africa and Lesotho which are both expected to experience 2.1 percent growth.

Locally, Finance ministry officials are keenly watching international developments around the impact of rising inflation, interest rates as well as the energy crisis and geopolitical tensions in Europe.

“Growth is expected to be driven by the mining sector, reflecting strong demand for diamonds,” the ministry said in response to Mmegi enquiries last month. “However, downside risks to the current projections could materialise if the ongoing war in Ukraine is prolonged, or if a tighter monetary policy to counteract high inflation leads to a sharp slowdown in growth in major economies. “This could lead to current growth projections being further revised downwards, reflecting reduced demand and lower diamond trading activity due to slower growth in trading partner countries.”

The ministry added that the lower economic projections also take into account subdued performance in the tourism sector due to weak real income growth in source markets.

Thus far this year, first-quarter growth reached seven percent before moving to 5.6 percent in the second quarter.