Botswana’s economy facing headwinds in 2019 but expected to recover in 2020 as the diamond market normalizes, IMF says

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The economy of Botswana will get worse in 2019 but recover in 2020, the International Monetary Fund said in a statement on Wednesday.

IMF said growth is expected to slow to about 3½ percent in 2019, due to weaknesses in the diamond market, a severe drought, and slower growth in neighboring countries, before rising again to 4.2 percent in 2020, as the diamond market normalizes and copper production comes into stream.

“The current account is projected to move to negative territory, contributing to a decline in reserves. The fiscal deficit is expected to reach 5¾ percent of GDP due to lower-than-expected revenue, higher-than-expected increase in public wages and other recurrent spending. Despite these challenges, the banking sector remains well capitalized and liquidity has improved,” wrote Mr. Papa N’Diaye, who led an IMF staff mission to Gaborone between November 13-27 to hold discussions with the government of Botswana.

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“The outlook is subject to significant downside risks, including a global rise in protectionism, a faster-than-anticipated slowdown in China and in the euro area, and continued slow growth in South Africa”.

N’Diaye said over the medium term, the country remains vulnerable to volatile mineral revenue and SACU transfers and to climate shocks. Upside risks could stem from higher-than-expected mining production.

He said fiscal consolidation should start in FY2020, supported by both expenditure and revenue measures beyond those considered by the authorities, adding that the consolidation needs to be carefully calibrated to minimize the impact on growth, competitiveness, and the most vulnerable.

According to him, achieving Botswana’s objectives of moving to a knowledge-based economy and to high-income status by 2036 will require changing the growth model from a mining and government-led model to private sector and export-driven. 

The discussions with the government of Botswana focused on macroeconomic policies to increase the resilience of the economy in the face of persistently low mineral revenue and transfers from the Southern African Customs Union (SACU), as well as the structural reforms needed to achieve the authorities’ objective to transition to a knowledge-based economy and high-income status by 2036.

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Simon Ateba
Simon Ateba
Based in Washington, District of Columbia, United States of America, Simon leads a brilliant team of reporters, freelance journalists, analysts, researchers and contributors from around the world to run TODAY NEWS AFRICA as editor-in-chief. Simon Ateba's journalistic experience spans over 10 years and covers many beats, including business and investment, information technology, politics, diplomacy, human rights, science reporting and much more. Write him: simonateba@todaynewsafrica.com

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