Budget strategy paper uncertain about 2024
Water and electricity consumption contributed big time to the Gross Domestic Product (GDP) in 2022, according to Statistics Botswana, sparking a 5.8 percent growth in the economy, compared to 11.9 the previous year.
The 2024/25 Budget Strategy Paper released last week shows that the water and electricity topped the chart of fastest growing sectors at 48.6 percent, followed by diamond traders at 17.6 percent, and manufacturing at 8.2 percent.
“Growth of these sectors was attributable to increased local electricity production, increased sales in rough diamonds and strong activity in diamond mainstream industries. The mining sector also contributed to overall growth in the economy on account of strong demand for rough diamonds during the year,” explains the document.
The Finance Ministry also observed that almost half of the total growth came from non-diamond private sector, while diamond activities were responsible for just under 40 percent of the growth. Other sectors with notable contributions included Accommodation and Food Services, and Transport and Storage.
“However, it is anticipated that the performance of the economy will be slower in the second half of the year, as growth in the mining sector moderates. On the back of this, real GDP growth is revised downwards by 2 percentage points to 3.8 percent in 2023 from 4 percent that was earlier projected in January 2023,” the ministry says.
Additionally, as the Russia Ukraine war rumbles on, anticipated growth could drop even further depending on the dynamics of the conflict, as well as economic fortunes in neighbouring South Africa.
The recent power outages due to recurring plant shutdowns at both Morupule A and Morupule B could also limit economic growth prospects for other sectors of the economy.
2022 also experienced growth in private consumption prompting a surge in inflation and higher borrowing costs.
“The growth in private consumption reflects the increase in salaries of public officers which was effected in April 2022. Investment fell by 12.3 percent, while exports and imports fell by 5.6 percent and 11.8 percent, respectively. The fall in investment was attributed to higher interest rates during the year, which affected the cost of investing. On the other hand, the fall in imports in real prices reflects the impact of high import prices particularly of food and fuel, which prevailed for the most part of 2022,” the Ministry says.
Meanwhile, the diamond industry got off to a rough start in 2023 due to global economic challenges ranging from war to natural disasters occasioned by effects of climate change.
“In line with expectations, rough diamond sales through De Beers Global Sightholder Sales (DBGSS) totalled US$2,832 million in the first six cycles of 2023 compared to US$3,777 million during the same sight sales in 2022, representing a decline of 25.02 percent,” says the strategy paper.
With just over three months of the year remaining, fears of a recession in the United States are still alive and this is likely to adversely affect diamond sales, with implications for export earnings and Government revenues as well as foreign reserves.