20 December 2017

Botswana: Bank Leaves Rate At 5 Per Cent

Gaborone — The Bank of Botswana's Monetary Policy Committee (MPC) on Monday left the bank rate unchanged at 5 per cent as the inflationary outlook remains positive.

Briefing the media following the committees decision, Bank of Botswana governor, Mr Moses Pelaelo said inflation was forecasted to be within the 3-6 per cent objective range in the medium term.

"Inflation decreased from 3 per cent in October to 2.9 per cent in November 2017," he said. He said subdued domestic demand pressures and the modest increase in foreign prices contributed to the positive outlook in the medium term. Mr Pelaelo said the outlook was, however, subject to downside risks emanating from the sluggish global economic activity, and the potential fall in commodity prices.

"Conversely, any substantial unanticipated upward adjustment in administered prices and government levies and taxes and any increase in international commodity prices beyond current forecasts presents upside risks to the inflation outlook," he said.

Talking about economic growth, he said the local economy registered a growth of 3.1 per cent in the 12 months period to June 2017 compared to a contraction of 0.7 per cent in the corresponding period ending June 2016.

Mr Pelaelo said the improvement in growth reflected a 4.9 per cent increase in non-mining activity from 3.3 per cent in the same period. He also noted that mining output decreased by 10.1 per cent in the 12 months to June 2017, adding that it was smaller than the large contraction of 22.9 per cent in the previous period.

He noted that domestic non-mining output was projected to be below trend in the short-to-medium term, constrained by continued modest growth in household incomes and moderate economic expansion in major trading partners.

"Nevertheless, gradual economic recovery is expected in the medium term in response to anticipated improvement in external economic conditions," he said.

He said the global economic output was forecasted to grow by 3.6 per cent in 2017 compared to 3.2 per cent in 2016.

He added that global growth was further projected to grow by 3.7 per cent in 2018, reflecting expected improvement in performance in both advanced and emerging market economies.

However, he said uncertainty surrounding global trade policy and openness as well as moderate growth in China could affect medium-term growth prospects.

Mr Pelaelo said regionally, the projected weak economic expansion in South Africa during the year due to persistent subdued demand and low investor confidence could potentially undermine domestic growth prospects by constraining private sector investment and household consumption.

Source : BOPA

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