IMF sticks to dim Botswana forecast

Mbongeni Mguni | Tuesday November 12, 2024 13:59

In the April edition of its World Economic Outlook (WEO), the IMF had projected 3.6 percent growth for Botswana in 2024, whilst government at the time of the February budget speech, expected a 4.2 percent expansion.

In a September update, after meetings with local fiscal and monetary authorities, the IMF revised this down to one percent, noting the impact of the diamond downturn and the risk that recovery could take longer than expected.

In the recently released October edition of the WEO, the IMF stood by its growth projections for the country, with the one percent forecast representing the second lowest in sub-Saharan Africa after the 26.4% contraction expected for South Sudan.

The latest numbers are a sharp turnaround from 2021 when the IMF accurately forecast that Botswana’s economy would grow at the highest rate in Africa, as diamonds rebound from the COVID-19 pandemic.

This year, however, Botswana’s projected growth is lower than the sub-Saharan average of 3.6 percent, the resource-intensive African countries’ average of 2.8 percent and the middle-income African countries’ average of three percent for 2024.

The country’s expected fortunes are also lower than the SADC average of 2.5 percent but are generally on par with the SACU average of 1.2 percent, a figure largely influenced by South Africa whose economy is expected to grow by 1.1 percent this year.

IMF researchers also maintained their expectations that the local economy will recover to 5.2 percent growth next year, keeping in line with observations made in the September consultations.

“Real GDP growth should rebound next year, although risks to the outlook remain elevated. “A strong recovery is projected in 2025, driven by the rebound in diamond production and trade. “But the economic outlook is highly uncertain, with the emergence of cheaper lab-grown diamonds, and the announced sale of De Beers by its UK parent company,” the researchers said in the September update.

Across the continent, the IMF noted that sub-Saharan Africa is navigating a complex economic landscape marked by both progress and persistent macroeconomic vulnerabilities.

“Countries in the region are trying to implement difficult and much-needed reforms to restore macroeconomic stability in the aftermath of repeated negative shocks and the ensuing need for support,” the researchers said. “Governments face a difficult balancing act in reducing macroeconomic vulnerabilities whilst also addressing development needs and ensuring that reforms are socially and politically acceptable.”

In Botswana, the new administration led by President Duma Boko, faces a difficult path back to fiscal stability, following running budget deficits dating back to the 2017–2018 financial year.

The new government is facing a wider budget deficit than the P8.7 billion originally forecast in February and may have to aggressively cut spending to protect government savings and restrain growth in debt, particularly as the local capital market keeps demanding higher interest.

By press time on Wednesday, Boko was yet to announce his Cabinet and within that, Finance minister.