Services sector anchors economic rebound
Brian Benza | Friday July 8, 2016 15:39
The 2.8% first quarter growth rate, which is equal to that of the same period last year, represents a recovery from the consecutive negative growth rates recorded in the third and fourth quarters of 2015.
Data released by Statistics Botswana (SB) this week shows that the growth in Real Gross Domestic Product (GDP) was attributed to real value added of trade, hotels and restaurants, finance and business services and transport and communications, which increased by 5.8, 5.2 and 4.6% respectively.
“All other industries recorded positive growth with the exception of agriculture and mining which decreased by 3.1 and 5.6 percent respectively during the quarter under review,” said SB.
Although it declined, the mining sector has shown an improvement in the first quarter of 2016 due to positive recovery in the global markets, particularly in the major markets for diamonds.
In the quarter under review, copper/nickel and diamond production decreased by 11.7% and 5.1% respectively. The increase in the real value added of the finance and business services was mainly due to the increase in real estate and business services by 8.4% and 7.0% respectively. Although electricity continued to record negative value added, it showed some improvement. In the first quarter, electricity recorded a negative value added of P108.8 million compared to a negative value added of P129.0 million registered in the first quarter of 2015.
“The decrease in the electricity real value added is attributed to a decrease in local electricity production by 14.7 percent and an increase of 23 percent in electricity imports.
The decrease in local electricity production was largely driven by plant failure at the coal-fired Morupule B Power Station in early February 2016.
At the end of quarter under review, only one unit was in operation at the power plant while the rest were undergoing remedial works,” said SB.
FNBB research manager, Moatlhodi Sebabole said he projects economic growth to average 3.8% over the next three financial years with 2016 Real GDP growth forecast at 3.1%.
“This growth is expected to be driven by a mild recovery in the diamond industry and increased fiscal investment under the government’s Economic Stimulus Package (ESP) and 11th National Development Plan implementation, as well as targeted FDIs through special economic zones. We note that risks to this recovery could come from budget underutilisation and ineffective implementation of infrastructure projects, especially for key inputs of water and electricity,” he said.
According to Sebabole, given an export concentration of over 85% to diamonds, major risk to growth remains as lack of diversification, whereas supply side strains of water and electricity negates robust growth in the non-mining private sector.
“The underperformance of the production sectors of mining, agriculture and manufacturing also poses risks to diversification prospects and thus the ESP and special economic zones approach ought to be accelerated for full and effective implementation,” he added.
In the 2016/2017 budget speech presented in February, finance minister, Kenneth Matambo projected the economy to bounce back from a negative 0.3% growth rate in 2015 to 4.2% this year.
But in a report highlighting the 2016 Business Expectations Survey (BES) released recently, the central bank said in spite of the fiscal interventions through the ESP there still exists challenges that are likely to retard economic growth to levels south of the projected 4.2%.
In the Regional Economic Outlook for sub-Saharan Africa released last month, the International Monetary Fund (IMF) estimates Botswana growth rate to print at 2.5 percent this year.
This is lower than the 3.7% the Bretton Woods institute predicted for the country in April following a consultative visit to Gaborone.