Analysts cast down NDP11 growth forecasts
Brian Benza | Tuesday June 7, 2016 18:00
In a economic review report titled Africa Markets Revealed, the economic experts say they see Botswana’s economy growing by no more than four percent during NDP11, while revenues will likely come lower than the estimates leading to either increased borrowings or a rise in drawing down on savings.
“Compared to a realised average growth rate of 5.3 percent under the 2010-2016 growth plan (NDP10), when the economy was still relatively buoyant, we are not that optimistic on the growth outlook for the next six years, and see GDP growth averaging no more than four percent year on year, with downside risks.
“This leads us to believe that the revenue assumptions underlying NDP11 could be undershoot, forcing the government to either increase its borrowing from the local or international markets or resort to a more aggressive drawdown of savings to fund the anticipated projects than it currently expects,” stated the Standard Bank analysts.
The Standard Bank Group operates as Stanbic Bank in Botswana
According to the analysts, the usual cost overruns usually associated with long term developmental projects might raise the need for further borrowings while the situation might be compounded by foreign exchange revenue weakness if the anticipated recovery in commodity prices turns out to be muted.
Earlier last month, the government launched the Medium Term Plan (NDP 11) that seeks to spend P370.2 billion from 2017 through to 2022.
The plan is expected to be fully funded by expected revenues of some P372 billion, based on its projections of an average GDP growth of 4.4 percent over the period. The plan kicks off with a three-year Economics Stimulus Programme aimed at boosting agriculture, construction, manufacturing and tourism activities, with the view to further diversify the economy away from diamonds.
When launching NDP11 last month in Gaborone, finance minister Kenneth Matambo said there was need to find new sources of growth as the targeted 4.4 percent growth rate would not be enough to address the country’s development challenges, which include poverty, income inequality and unemployment.
While finding new growth sources to enlarge the size of the economy is a priority target in the new plan, figures show that the economic rate of growth has been slowing down over the years. Under NDP10, which covered the period 2009-2016, the economy performed slightly better than the original forecast achieving a growth rate of 3.9 percent from a target of 3.3 percent with the non-mining sector having driven growth.
Commenting of 2016 projections, the analysts said the ongoing consolidation in diamond prices at relatively low levels support their view that the risks to GDP growth this year are firmly skewed to the downside.
And while government has already launched a new long-term development plan (Vision 2036), the first official draft of that document will only be unveiled in September.
“This means that actual implementation may only start in the second half of 2017 with the impact being felt from 2018 onwards. Key, growth-propelling projects under the 2016-2017 budgets such as the construction and rehabilitation of energy, water and transport infrastructure are welcome. However, it is important to note that the largest share of the capital expenditure bill goes to the security cluster, where the direct multiplier effect on GDP is less obvious,” read the report.
The pundits expect GDP growth to rebound from a negative 0.3 percent in 2015 to a relatively modest 3.8 percent this year and four percent in 2017.