Local economy to register modest growth

Kabelo Adamson
STEADY INCLINE: Local economy looks to make small growth

The local economy is yet again forecast to register moderate growth this year driven by stabilization in the diamond market.

The projections were made by a local investment manager, Kgori Capital in its Fourth Quarter Insights Report.

It is forecast that the local economy will expand by 3.5 percent for the fiscal year 2019 and by 4.0 in 2019 driven mainly by stabilization in the diamond sector.

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The sector, which is the mainstay of the economy accounting for over 80 percent of the total country exports faired terribly last year when international sales fell drastically.

Now, the sector is anticipated to pick up slightly this year after a challenging 2019 in which sales dropped badly.

When delivering the budget proposals for the financial year 2020/2021, the Minister of Finance and Economic Development Dr. Thapelo Matsheka indicated that the proposals were presented against the backdrop of continued uncertainty in the global economy.

He specifically mentioned that the continued tension between the United States of America (USA) and China, being the two major markets for Botswana diamonds continue to undermine the country’s economic performance in general and the fiscal position in particular.

Matsheka indicated that this calls for fast-tracking of measures to promote diversified exports to reduce the impact of external shocks on the domestic economy.

While Kgori anticipates the domestic economy to register 4.0 in 2020, the finance ministry, on the other hand, predicts a different figure.

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Matsheka expects the domestic economy to continue to register positive growth despite some challenges arising from the weak and uncertain global economic environment.

He says the local economy id estimated to have grown by 3.6 percent in 2019 and to reach 4.4 percent in 2020 driven by faster growth in the services sector.

Meanwhile, Kgori Capital has noted in its report that it expects the central bank, Bank of Botswana to apply another bank rate cut in the first half of this year in order to spur economic activity.

Last year during its August Monetary Policy Meeting (MPC), the central bank cut the rate to a record low, slashing it by 25 basis points from 5 percent to 4.75 percent in an unexpected move after experts warned the rate was already low leaving BoB with little space to maneuver.

According to the Kgori Insights report, the August 2019 rate cut was effected in order to support growth as the bank now feels expectations of stable and low inflation are well anchored.

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