BoB expects economy to miss 4.2% growth projection
Mbongeni Mguni | Tuesday June 25, 2024 10:03
Growth narrowed to 2.7% last year from 5.5% in 2022, due largely to a downturn in diamond mining in the second half of 2023, as global uncertainties and market issues dampened the retail market.
During a briefing on Tuesday, the Bank’s director of research and financial stability, Innocent Molalapata, told BusinessWeek that the economy’s performance in the first half of the year was an indication that the 4.2% growth forecast would likely be missed.
“Mining production has gone down in the first half so basically when you look at 2023, the mining sector started performing not so well in the second half due to unfavourable global conditions and we saw this extending into the first half of this year,” he said.
Molalapata added: “We saw production going down by around 27% in the first quarter of this year and that’s an indication that the first half is not doing well. “The second quarter was also lower than last year.”
Statistics Botswana is expected to release first quarter growth figures on June 28 and half year estimates on September 27.
While not giving details on where the BoB expects growth to land this year, Molalapata said a downward revision of the initial projection was expected.
“With the reduced economic performance in the first half, one would expect that economic growth of 4.2% is unlikely to be realised and we are likely to see a downward revision from the information we have seen in 2024," he said.
Molalapata however said the non-mining sector would be helped by improvements in the supply of water and electricity, as well as the central bank’s decision to cut interest rates in December and last week.
“Last year, one of the sectors not doing well was the supply of water and electricity mainly because of Morupule B but in the first half, we did not have those challenges. “We expect that power supply supported the non-mining sector in the first half and its performance will have improved. “In addition, the uptake of the Economic Recovery and Transformation Plan as well as government spending is expected to have supported non-mining,” he said.
Molalapata added: “Non-mining will improve but on the balance of probabilities, because of mining, growth will go down.”
The latest forecast is a blow to the country’s aspirations to accelerate transformation and economic growth in pursuit of the Vision 2036 goal of achieving high income country status.
The central bank now forecasts that the economy should grow by at least 6.7% each year in order to achieve the high income country status by 2036.
BoB governor, Cornelius Dekop, said there was urgent need to boost the impact of policies and spending.
“There’s need for improved implementation, something we talk about in this country over and over again,” he said. “There are areas where outcome is not matched by investment. “There is also a serious need to measure performance by output rather than input in this country. “The outputs are critical for growth prospects and the transition to a high income country>
The BoB estimates that real GDP would have to more than double for the country to realise the 2036 ambition, a task that is increasingly difficult due to prolonged periods of low growth. The low growth seen in the last ten years has largely been linked to the volatility associated with mining, as well as external shocks, combined with the slow pace of economic transformation.