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Policy rate unchanged at 5 percent

Policy rate unchanged at 5 percent
HAPPY: Pelaelo

Inflation rate set to be within 3 – 6 percent objective range

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

A statement from the BoB after the MPC meeting held at the Central Bank’s Boardroom on Monday reads.

“The outlook for price stability remains positive as inflation is forecast to be within the 3 – 6 percent objective range in the medium term.

Inflation decreased from 3 percent in October to 2.9 percent in November 2017,” continues the communiqué, in which it is stated that subdued domestic demand pressures and the modest increase in foreign prices contributed to the positive inflation outlook in the medium term.

The outlook is subject to downside risks emanating from sluggish global economic activity and the potential fall in commodity prices.

The BoB statement continues that conversely, any substantial unanticipated upward adjustment in administered prices and government levies and/or taxes and an increase in international commodity prices beyond current forecasts present upside risks to the inflation outlook.

Talking on the Country’s Gross Domestic Product (GDP), the statement states that it grew by 3.1 percent in the twelve months to June 2017 compared to a contraction of 0.7 percent in the corresponding period ending in June 2016.

The improvement in growth reflects a 4.9 percent increase in non-mining activity, from 3.3 percent in the same period.

“However, output in the mining sector decreased by 10.1 percent in the twelve months to June 2017, albeit smaller than the large contraction of 22.9 percent in the previous period,” reads part of the message.

The BoB also projects that domestic non-mining output will be below trend in the short-to-medium term, constrained by continued modest growth in household incomes and moderate economic expansion in major trading partners.

Nevertheless, gradual economic recovery is expected in the medium term in response to anticipated improvement in external economic conditions, while Global output is forecast to grow by 3.6 percent in 2017, compared to an estimated increase of 3.2 percent in 2016, and by 3.7 percent in 2018, reflecting expected improvement in performance in both advanced and emerging market economies.

Regionally, the projected weak economic expansion in South Africa in 2017 due to persistent subdued demand and low investor confidence could potentially undermine domestic growth prospects by constraining private investment and household consumption.