Analysts see lower economic growth in 2017

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TSHIAMO TABANE

Market analysts have indicated that the level of economic growth in 2017 could come out lower than the 4.1 percent projected by government earlier this year, following the sluggish growth in Gross Domestic Product (GDP) recorded in the first quarter of 2017 and the weak diamond prices during the second quarter of the year.
In the quarterly economic report released last week, Motswedi Securities market analysts Garry Juma and Moemedi Mosele projected that GDP will this year grow by 3.1 percent, contrary to government projections that it will grow by 4.1 percent.
“The performance of the local economy will largely continue to be affected by exogenous factors such as the performance of the global economy particularly developed markets which have a bearing on the diamond industry,” state the analysts.
They warned that the weak mining sector also poses a threat to the 4.1 percent economic growth projected by the Finance and Economic Development Minister Kenneth Matambo. “Diamond value added to GDP decreased by 2.8% during the quarter under review due to weaker diamond prices on the international market and this led to a reduction in diamond production. This is worrisome and if the trend continues it may result with decline in diamond exports which will also impact on the country’s balance of payment position and government revenues,” said the analysts.
The analysts indicated that following the declining production in the mining sector during Q1 2017 and weak diamond prices, 3.1 percent annual growth in GDP could be recorded by December 2017.  Domestic economy increased by 0.8 percent in the first quarter of 2017 (Q1 2017), compared to an increase of 4.2 percent recorded during the fourth quarter of 2016 (Q4 2016) and the marginal growth in Q1 2017 came as a result of 6.4 percent decline in mining production. Recent figures indicate that during Q1 2017, diamond production decreased by 5.0 percent, gold production (26.0 percent), soda ash production (39.0 percent), and salt production (31.7 percent).
The analysts however indicated that continued expansion is expected from the non-mining sector which showed encouraging growth during Q1 2017. “The non-mining sector continues to grow as it expanded by 5.4% year on year from another growth of 3.3% in Q4 2016. The growth in the non-mining sector was led by growth in agricultural sector which grew by 1.5 percent year on year, trade, hotels and restaurants (18.7 percent) and finance and business services which expanded by 5.4 percent. It is pleasing to note that the trade, hotels and restaurants is now the biggest contributor to GDP (20.9%), overtaking mining (17.6%). This is largely attributed to the positive performance realized from downstream diamond industries,” they said. According to the Juma and Mosele the resilience of the non-mining sector shows that the economy is slowly diversifying away from the mining sector.
Motswedi Securities has indicated that continued growth from the agricultural sector, tourism and financial services sectors will be recorded during the second half of 2017.

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