Botswana Back on a Higher Growth Path

CEIC Macro Watch - February 28, 2014 - Despite the challenging global economic environment, Botswana’s economy is returning to a high-growth path. The Sub-Saharan economy rebounded robustly from the 2009 economic downturn when real Gross Domestic Product (GDP) contracted by 7.84%. Supported by higher global demand for diamonds – the country’s main export commodity – the local economy grew by 8.59% and 6.10% in 2010 and 2011 respectively. Although deceleration occurred in 2012, to 4.18%, the data for the first three quarters of 2013 show signs of improvement. While the pace of growth in the first quarter was still lagging, in the second and third quarters real GDP increased in year on year (yoy) terms by 7.38% and 7.09% respectively. This development was driven not only by rising diamond exports, but also by continuous disinflation and loose monetary policy, coupled with the buoyancy of non-mining sectors, such as manufacturing, construction and trade. In the first eleven months of 2013, the growth rate of exports averaged almost 80% yoy, with total year-to-date export receipts reaching BWP 65.60 billion (USD 7.83 billion) in November. This was mainly caused by a substantial increase in diamonds shipped abroad, which comprised about 85% of the Commonwealth nation’s total exports. Recently, exports have also been helped by the depreciating exchange rate. Under the current crawling peg exchange rate regime the Botswana Pula is pegged to a basket of currencies composed of the South African Rand and the IMF’s Special Drawing Rights (SDRs). Owing to the continued freefall of the Rand against other major world currencies, the Botswana Pula has been depreciating sharply against the US Dollar, losing 9.3% of its value in 2013. The growth of the local economy during the past quarters was broadly based. Although Mining, and Water and Electricity, were harshly hit during the 2011-2012 period, these industries rebounded in the second and third quarters of 2013. On the other hand, the trade sector and financial and business services have been growing steadily for the past 15 consecutive quarters (since the beginning of 2010), most recently by 5.17% and 3.17% yoy, respectively, during the third quarter. Sectors such as trade, construction, transport and communications, and financial and business services, have maintained continuous and sustainable growth, collectively comprising 52% of the generated Gross Value Added between July and September 2013. By Kamen Parushev in Bulgaria - CEIC Analyst Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
28th February 2014 Botswana Back on a Higher Growth Path

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