Barclays predicts tougher economic conditions this year

Diamond market to be affected by China – US trade dispute

The outgoing Barclays Bank of Botswana Managing Director, Reinette van der Merwe says as the bank, they expect the local economy to recede to 4.2 percent growth this year.

The local economy is expected to register a growth of 4.2 percent, from 4.5 percent registered in 2018.

Van der Merwe says this will come on the backdrop of global demand for diamonds being challenged by ongoing trade disputes between China and the US, who are the two largest consumers of diamonds globally.

“Therefore, the mining sector will have to accelerate significantly if economic prospects are to brighten,” said Van der Merwe recently during the presentation of the bank’s financial results.

Generally, prospects in 2019 are said to be likely to be hampered by challenging global conditions.

Additionally, Barclays’ chief says growth in gross fixed capital formation and government expenditure is encouraging and could present upside risks, particularly against the government’s diversification agenda and high expenditure programme.

Despite Barclays’ prediction of the 2019 diamond market performance, De Beers, a partner of Botswana government in Debswana, recently said it expects positive global consumer demand in the main diamond consuming markets in 2019.

Although the diamond company remains optimistic about the 2019 diamond market performance, the company warned challenges still remain in place.

However, results of the two sights that De Beers has held this year indicate a downward trend for rough diamond sales value.

In the first sight of the year held in January, the value of rough diamond sales amounted to $505 million compared with $627 million of the same cycle this year.

In the second sight of the year held in March, the group’s rough diamond sales also took a dip, as it recorded $490 million, a major decline when compared to $563 million seen in the same cycle last year.

De Beers Group CEO said earlier this month that overall demand for lower value rough diamonds have remained subdued so far, saying however, that they have seen an increase in demand from India as factories begin to restock.

On the inflation side, Van der Merwe says the expectation is that inflation will rise, but will remain comfortably within the Bank of Botswana’s 3 – 6 percent objective range in the year ahead.

Given the positive inflation outlook, she believes the central bank will keep the policy rate on hold for the remainder of 2019.

In the past year, inflation remained low and stable, increasing from 3.2 percent in December 2017 to 3.5 percent by December 2018 and averaging 3.2 percent.