The economy rebounded strongly after the 2020 COVID-19 shock, recording 11.8 percent growth in 2021-22 and a higher than expected 6.7 percent for 2022-23. However, the continued recovery is threatened by the possibility of a slowdown in the global economy, a fact acknowledged by the Finance Ministry which expects the key mining sector to shrink by 0.1 percent in the 2023.
Growth in 2023-24 is forecast at four percent, before rising to 5.1 percent in 2024-25. Both figures are below the 5.7 percent level required to reach high income status by 2036.
“Despite (the) positive performance in 2022, looking ahead, macro-fiscal risks are elevated,” Finance Minister, Peggy Serame told parliamentarians in her 2023 Budget Speech this afternoon. “Among these are risks to GDP growth which stem from the likelihood of slowing growth and possible recession in advanced countries. “These may adversely affect diamond sales in 2023, with implications for export earnings and Government revenues. “This is being compounded by rising COVID-19 infections in China, which has led to severe restrictions on retail activity and slow GDP growth.”
Serame said the post-pandemic recovery seen in the economy had filtered through to other macro-economic indicators such as unemployment, where the latest data from Statistics Botswana indicates a marginal improvement.
The major drivers of the expected global slowdown include the fallout from Russia’s invasion of Ukraine, the effects of higher interest rates and the continuing impact of the COVID-19 pandemic. The World Bank and the International Monetary Fund have released varying forecasts of the outlook for this year, which analysts believe point to the uncertainty surrounding the performance of the global economy.
For Botswana, any global slowdown will reduce the demand for rough diamonds, the country’s most important economic commodity, as well as earnings from tourism, another key foreign currency income line.
By raising spending on the development budget, fiscal authorities are returning to the counter-cyclical policy the country has previously used to spur economic activity in the face of a slowdown.
For 2023-24, the Finance Ministry had initially expected a development budget of P14.7 billion, according to the Budget Strategy Paper released last September. Forecasts in the paper, which is an annual blueprint produced as part of the budgeting process, are further finetuned after consultations with stakeholders such as legislators and local authorities.
In September, the Budget Strategy Paper had forecast a P163 million deficit for 2023-24 or 0.1 percent of GDP. Earlier today, Serame announced that the deficit was now forecast at P7.6 billion or 3.06 percent of GDP.
The minister said the increase in the development budget to P21 billion was designed to fill infrastructure gaps and implement projects that are necessary to unlock constraints to economic growth.
“Government will, through this proposed budget, invest in economic and social infrastructure necessary to support economic activities in order to stay on track to achieving high-income status by 2036, as well as sustaining livelihoods for the most vulnerable groups of the society,” she said.
According to Serame, the Ministry of Lands and Water Affairs is proposed to receive the largest allocation of the development budget at P6.07 billion for major water projects that include the North South Carrier 2.2 project. The second largest share of P3.17 billion is proposed for the Ministry of Transport and Public Works for on-going major roads projects, including completion of upgrading of intersections at the KT Motsete Drive at Btv, Rainbow and Game-City circles.
Funding for the P7.6 billion deficit will come from the domestic capital market, external loans and government’s reserves.
