Botswana’s economy is expected to continue with stable growth during the 2014/15 financial year, despite challenges brought by a subdued global economic environment.
Minister of Finance and Development Planning, Kenneth Matambo said in his 2014/15 budget speech today, February 3, that real gross domestic product (GDP) was projected to grow by 5.1 per cent.
Though it was a slight decline of 0.3 per cent compared to 2013, Minister Matambo said the outlook for domestic economy remained positive.
Growth in the GDP was expected to be driven by the buoyant non-mining sectors, which had been showing impressive performances.
In 2012, he said the non-mining sectors, which included construction, social and financial services, finance and business services as well as trade, hotels and restaurants, posted a collective growth rate of 6.2 per cent.
Beneficiation from the diamond industry was also set to boost growth.
“The relocation of the Diamond Trade Centre from London to Gaborone by the end of 2013 was expected to contribute positively to the prospects of growth of the domestic economy, despite the weak external diamond demand,” said the minister.
Among the non-mining sectors that registered high growth rates were construction at 14.4 per cent, social and personal services (12.2 per cent), and finance and business services (11 per cent).
“Growth in these non-mining sectors shows progress in economic diversification.
It is worth noting that, unlike the mining sector, even during the 2008/09 economic down-turn, the non-mining sectors showed resilience, with most of the sub-sectors attaining positive growth rates.
“Targeted investment in the non-mining sectors therefore seems to have potential to sustain economic growth even during hard times,” Matambo said.
However, he said the agriculture sector, which was a major contributor to the rural livelihoods, was projected to slow down.
He explained that the slow-down was a result of recurring droughts and a constrained market outlet for the sector, especially for the beef sub-sector.
Matambo also said the prospects of the country’s two major revenue items of minerals and customs and exercise continued to be surrounded by uncertainty.
This was due to the sluggish recovery of the world market, and the on-going negotiations of the SACU revenue sharing formula.
The minister said the mining sector, which accounted for 20 per cent of GDP, registered real declines of 2.3 per cent in 2011 and seven per cent in 2012.
That, he said reflected the continued weak demand in the advanced and emerging economies, which were the major markets for Botswana’s diamonds.
“Of late, the two sources have accounted for over 60 per cent of total revenue and thus, any shock to any or both of these sources would have a bearing on the level of available revenues and likely expenditure for the next financial year.”
Matambo also pointed out that costs of inputs exceeded the values of sales in the water and electricity sector, resulting in negative growth.
He said that was mainly due to the challenges arising from delay in the commissioning of Morupule B Power Station, which resulted in a shortage of domestic power supply and increased costs of imports from South Africa.
On inflation, the minister was happy that it had declined to 4.1 per cent in December 2013 down from 7.4 percent in December 2012.
He said the current levels of inflation were within the Bank of Botswana’s objective range of 3-6 percent.