Gaborone — Botswana's economy has continued to expand at a solid pace, recording above trend growth of 5.8 per cent in 2022, and the recovery from the pandemic primarily reflected elevated mining production as well as robust manufacturing and construction.
This was said by the managing director of ABSA Bank Botswana, Ms Keabetswe Pheko-Moshagane, during the announcement of the condensed consolidated interim financial results for the year that ended in June this year on Thursday.
Ms Pheko-Moshagane said looking forward, expectations were for government to step up plans on infrastructure investment together with accommodative monetary conditions and reforms to improve business environment to provide support to the economy.
"The new deal that Botswana recently entered into with De Beers Group is also expected to support the economic outlook going forward, but the downside risks remain considerable, particularly adverse weather conditions and the global backdrop that threaten the mining sector and likely to depress other exports as well," she said.
She said considering the strong first quarter performance and a lower inflation environment, there was an overall belief that an economic growth of 4.1 per cent was achievable this year.
On inflation and monetary policy, Ms Pheko-Moshagane said headline inflation averaged 7.8 per cent in the first half of 2023, but has decelerated sharply reaching 4.6per cent in June with the expectation that it will average 4.9 per cent in 2023, significantly lower than the 12.2 per cent in 2022. She said the decline in inflation was due to base effects from the high inflation recorded in 2022 and the decline in fuel prices this year.
However she said there were still upside risks to inflation, including higher than anticipated global commodity prices and supply constraints.
Weaker domestic and global activity, possible disinflationary effects of tighter monetary policy globally, stronger than anticipated Pula appreciation and restrained global commodity prices could keep inflation subdued.
Ms Pheko-Moshagane said given the upbeat outlook on inflation over the medium term, there was expectation for the policy rate to remain unchanged in 2023.
On the international stage, she said, the International Monetary Fund (IMF) projected that global growth will fall from an estimated 3.5 per cent in 2022 to 3 per cent in 2023 and 2024, and that the aggressive tightening in monetary conditions to fight inflation continued to weigh on economic activities.
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However, a combination of factors including tight labour markets, savings from the pandemic lockdowns and fiscal stimulus have moderated the impact of sharp tightening in monetary conditions on economic growth.
"Lower energy prices are helping to bring down headline inflation and ease strain on household budgets, and the earlier than expected reopening of China has provided a boost to global activity," she said. "However, significant uncertainty about economic prospects still remain, and risks to the projections are on the downside."
Ms Pheko-Moshagane said Sub-Saharan African economies remained under pressure but were working towards macroeconomic stability and onto a more sustainable growth path. According to IMF forecasts, growth is projected to decline to 3.5 per cent in 2023 before picking up to 4.1 per cent in 2024.
"Many of the region's key economies are under IMF programmes and have embarked on much needed reforms to address macroeconomic imbalances by implementing fiscal consolidation, strengthening governance, and moving towards more inclusive growth," she said.
BOPA
