IMF trims forecast for Botswana economy
Mbongeni Mguni | Monday April 24, 2023 06:00
The forecast is contained in the latest edition of the IMF’s World Economic Outlook (WEO), which contains updates of the institution’s projections from the October edition.
The IMF’s latest forecast for Botswana in the 2023–2024 fiscal year is slightly above the average of 3.6 percent expected for sub-Saharan Africa and comfortably ahead of both the averages for SADC and the Southern African Customs Union. In the Southern Africa region, the IMF’s forecast for Botswana’s growth in 2023–2024 is the fourth highest after Mozambique, Mauritius, and Zambia. By comparison, South Africa is expected to grow by 0.1 percent, while other neighbours such as Namibia and Zimbabwe will expand by 2.8 percent and 2.5 percent respectively.
The IMF’s researchers warned that economic activity in sub-Saharan Africa this year and in the short term would be adversely impacted by tighter financial conditions in the global market. These conditions include higher borrowing costs, the strong dollar, shrinking aid budgets and reduced investment inflows.
“Growth across the region varies from country to country,” Abebe Aemro Selassie, director of the IMF's African Department told a press briefing last Friday. “Some countries, particularly those in the East African Community, or non-oil resource-intensive countries, are expected to fare better but some major economies bring down the average sub-Saharan growth rate, like South Africa where growth is projected to decelerate sharply to only 0.1 percent in 2023.”
He added: “People in sub-Saharan Africa are feeling the effects of a funding crisis. “Since Russia's invasion of Ukraine, the cost of living is more expensive, borrowing costs have increased and access to cheaper funding is dwindling. 'Coupled with a long-term decline in aid and a more recent fall in investment from partners, this means that there is less money to be spent on vital services like health, education, and infrastructure.”
The IMF’s projection of 3.7 percent growth for Botswana this year is more conservative than government’s forecast of four percent growth. For the next fiscal year, 2024-25, the IMF expects 4.3 percent growth for Botswana, while government is projecting 5.1 percent.
Despite their differences, the estimates are below the levels the country has targeted in pursuit of transforming into a high-income economy by 2036.
Finance Ministry technocrats previously told BusinessWeek that the economy needs to consistently grow by more than five percent each year until the end of 2036, to meet the high-income status.
Economic growth averaged 2.7 percent between 2017 and 2021, a period that covers most of the years of the National Development Plan 11. A growth rate of 5.7 percent is required in the two-year Transitional National Development Plan and the subsequent National Development Plan 12, which covers the years to 2029.
The economy grew by 5.8 percent in the last fiscal year, from 11.9% in 2021–2022, with economists noting that expansion levels were stabilising from the pandemic disruption.
“The economy and most of its various sectors have largely surpassed the pre-pandemic levels of performance,' Dr Lovemore Taonezvi, a lecturer at Ba Isago University’s Faculty of Commerce, told BusinessWeek. “While most sectors have exceeded their pre-pandemic economic performance levels, key sectors such as agriculture, forestry and fishing, construction and real estate activities are yet to surpass their pre-pandemic levels.”