Fitch sees positive GDP growth in Botswana

GDP will expand by P6.16 billion (4%) in 2018 to reach P152 billion


Updated macroeconomic forecasts for Sub Sahara Africa show that Botswana is among countries with a positive economic outlook, thanks to her stable political environment that expected to support a steady GDP growth between 2017 and 2019.
According to Fitch Group, the UK based rating agency which recently cut South Africa’s sovereign credit status to “junk”; after expanding by P3.81 billion (2.7%) in 2016, Botswana’s GDP will grow by P4.96 million (3.4%) this year to reach P146 billion. The agency has predicted that the GDP will expand by P6.16 billion (4%) in 2018 to reach P152 billion and further grow by P6.81 billion (4.1%) in 2019. Fitch has also projected that inflation rates will increase from 2.8% recorded in 2016 to 3.3% in 2017, 3.8% in 2018 and 4.0% in 2019. According to the institution, Bank of Botswana interest rates on lending are expected to remain unchanged at 5.50% in 2017 and expand slightly to 6.00% and 6.50% in 2018 and 2019 respectively. Export revenues will grow from P74 billion in 2016 to P75 billion in 2017 and further expand to P82 billion and P90 billion in 2018 and 2019 respectively, according Fitch’s macroeconomic outlook released last week.
In the same forecast, Botswana Fitch Group analysts say the country will experience an uptick in economic growth over 2017 as output in the extractive sector returns to positive growth. “Our mining team expects Botswana’s diamond production to return to growth of 0.5% compared to a 6.1% contraction in 2016 and this will provide a modest boost to government revenues,” they said, further nothing that stable inflation and low bank rates, compared to recent years, will provide a boost to private consumption over the year ahead:  “Inflation is poised to increase on the back of rising global oil prices and an uptick in domestic demand, but would remain within BoB’s 3.0-6.0% target band, while slowly improving economic growth will limit the impetus for further bank rate cuts.”
Fitch noted that it revised its historical estimates and forecasts for the country’s budget balance to reflect a modest expansion in the deficit in the year ahead. The agency which had initially indicated that the budget deficit would come in at 4.5% and 3.6% in 2016/17 and 2017/18 respectively, now expects the deficit to widen to 1.4% over the upcoming year, as a result of a recovery in mineral and non-mineral revenues.
It has however cautioned that given Botswana’s dependence on imported energy and food, any unexpected rise in global food or oil prices beyond its forecasts would affect the country’s projected GDP growth and inflation rate. “Uncertain energy supplies pose a persistent risk to economic activity in Botswana and we expect the country to remain susceptible to potential adverse weather conditions,” Fitch analysts said in the report.