Key sectors such as diamonds and tourism, dependent on external demand, will be affected.
Speaking during First National Bank Botswana’s post-budget briefing recently, Cairns said an additional concern for Botswana was the uncertainty load-shedding was having on South Africa’s inflation outlook.
“It’s not 2008 and it’s not COVID-19, but the global environment will be less supportive of Botswana this year and in the years ahead,” he said. “The global economy is slowing down and while it’s not at the level of 2008 or COVID-19, there will be a long period of slower growth that will impact Botswana. “In addition, for Botswana, the governor of the South African Reserve Bank has said load-shedding creates high uncertainty on inflation. “We don’t know the impact from load-shedding and that’s a spillover to Botswana.”
South Africa is battling an electricity supply crisis and in 2022 broke its own record for the highest number of consecutive days with insufficient power. Several municipalities, provinces and many private companies are fast-tracking investments in their own generation to cope with the crisis, something that could also impact on prices of goods and services coming across the border to Botswana.
Cairns said aside from these threats, Botswana would also not escape unscathed from developments on the global stage, where at best, the world economy would slow down and at worst, enter a recession in regions that are key for the local economy.
“Botswana remains a small economy that is highly dependent on the global environment and its cyclical nature,” Cairns said. “The cyclical nature suggests were are going into a period of slower growth and in fact, when COVID-19 came, the world was already going into an economic downturn.”
Much of the factors for the expected slowdown stem from the US economy, which spent 2022 sharply raising rates to fight escalating inflation, in the process leading the greenback to historic highs against other hard currencies and the pula. The fallout from Russia's invasion of Ukraine on commodities such as food and fuel also continues, although the energy crisis in Europe has weakened, largely due to a milder-than-expected winter.
“Over the past few months, we have had a few indications that the US economy is slowing and even the strong jobs report just delays the inevitable. “The Wall Street Journal found that 75% of surveyed economists expect the US to suffer a recession this year. “Europe will avoid one, but it will not be fast growth by any means. “The positive story is China where there are signs the COVID wave has peaked quickly and it can re-integrate into the global economy,” Cairns.
The RMB analyst’s forecasts come as the local economy braces for a global slowdown, with Debswana preparing a recession plan to cope this year.
