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Bank rate unchanged at 5 percent- BOB

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Bank rate unchanged at 5 percent- BOB
BANK OF BOTSWANA GOVERNOR: Moses Pelaelo

Inflation decreased from 3.4 percent in April to 3.3 percent in May 2018 >stays within the objective range

The Monetary Policy Committee (MPC) of the Bank of Botswana (BoB) decided to maintain the Bank Rate at 5 percent.

This was said by BoB Governor, Moses Pelaelo after MPC meeting held at the central bank’s Boardroom in Gaborone on Tuesday.

A statement from the bank states that the outlook for price stability remains positive as inflation is forecast to be within the 3 – 6 percent objective range in the medium term. It continues that inflation decreased marginally from 3.4 percent in April to 3.3 percent in May 2018, and was within the objective range.

“Subdued domestic demand pressures and the modest increase in foreign prices contribute to the positive inflation outlook in the medium term,” reads part of the statement, which continues that the outlook is subject to upside risks emanating from the potential rise in administered prices, commodity prices and government levies and/or taxes beyond current forecasts.

“However, restrained global economic activity, technological progress and productivity improvement present downside risks to the outlook,” said Pelaelo in his address.

The Governor noted that Real GDP in Botswana grew by 2.4 percent in 2017 compared to the faster growth of 4.3 percent in 2016 and also that the slower growth reflects a lower increase of 4.2 percent in non-mining activity, compared to 5.5 percent in the previous year.

“Mining output, however, contracted significantly by 11.2 percent in 2017 compared to a decline of 3.5 percent in 2016,” he said, highlighting that GDP is projected to expand at a faster rate in the short-to-medium term, driven largely by growth in the services sectors and recovery in mining activity, in line with the positive global economic prospects.

The Bank projects the economy to operate close to, but below full capacity, in the medium term while global output growth is estimated at 3.8 percent in 2017 and is projected at 3.9 percent in 2018 and 2019, reflecting broad-based improvement in economic performance.

Pelaelo further noted that protectionist trade policies, the potential build-up of financial vulnerabilities induced by easy financial conditions, geopolitical tensions, and adverse weather conditions could negatively affect the medium-term growth prospects.