Will 2014 be the magic year for the global economy?

Not since the great depression in the 1930s has the world’s integrated economy degenerated with devastating consequences that were felt in all capitals of the world just over half a decade ago. Six years later, it remains in macroeconomic conversations and still promises further  regression. The worst is however, over, according to financial experts.

Most are  generally predicting  a stable global economy this year. According to Bogolo Kenewendo, an economist with think tank, E-consult, “Both the World Bank and IMF (International Monetary Fund) forecast positive numbers for the global economy. The US is  expected to have its fastest growth in a decade; consumer and business confidence is rising. There are expectations that the positive growth in advanced economies will boost developing countries’ exports (our diamonds).”

Kenewendo is of the view that China’s growing  middle class marks a good omen for Botswana’s diamonds and this can only prove positive for the world’s largest diamond producer by value.
The positive sentiments are shared by Afena Capital Chief Executive Officer, Bakang Seretse in an opinion article made public this week. Seretse said while there is still uncertainty in the market, a moderate growth is expected in 2014. “In some areas growth will remain elusive though. The US, Europe and South Africa should all register some modest GDP (Gross Domestic Product) growth,” he said.

On the domestic front, Seretse said the positive mood has the ability to carry forward the expected growth. “GDP growth in excess of 4 per cent remains a highly possible outcome for this year. The market will be anxious to see how developments in the global economy, especially in key export markets will impact on diamond exports,” he noted. In terms of growth expectations, the Botswana economy has been greatly swayed by the unpredictable mining activity.

E-consult’s Kenewendo said though diamonds have had their challenges, they are key to the growth of the non-mining sector and will have a profound impact on the future of diversification in the country. “Remember, diversification includes mining. We expect growth in polished diamonds. Construction has potential, as well as banking and finance. We  hope that Bank of Botswana BoB’s rate cut will induce firms to borrow more,” she said.

The Ministry of Finance and Development Planning is expected to present its budget in less than two weeks with just over a billion Pula in deficit due to efforts to secure the national power supply.
Kenewendo and Seretse both said they expected higher social and infrastructural spending by the national budget since it is an election year.

“It is also an election year and our expectation is for Rre Matambo (Minister of Finance) to deliver an expansionary, albeit disciplined budget given exhortations to strive for even higher development goals. We have already seen glimpses of this with the re-introduction of certain social programs such as Tirelo Sechaba. We expect some sort of increase in civil servants salaries as well.” Seretse said.
Kenewendo observed that socio economic programs will have significant spending in the 2014/15 fiscal year.  “We expect some added activities this year due to the elections,  like increases in Agricultural assistance funding, Ipelegeng etc.  Those programs that are said to reduce unemployment and poverty.”

It remains to be seen if 2014 will have the economic antidote that is greatly needed for the return to a sustainable economy both for Botswana and the world.