16 Jun 2016

Meeting of the Monetary Policy Committee held on Wednesday concluded that the outlook for price stability remains positive, with the forecast pointing to inflation staying within the 3-6 per cent objective range in the medium term.

A news release from Bank of Botswana states that global output is projected to grow by 3.2 per cent in 2016 and 3.5 per cent in 2017, compared to the estimate of 3.1 per cent in 2015.

However, the release states the economic performance across the globe remains uneven, with challenges relating to economic restructuring in both developed and emerging market economies constraining medium-term growth prospects.

In Botswana, GDP is estimated to have contracted by 0.3 per cent in 2015, compared to the 3.2 per cent growth of 2014, thus reflecting the contraction of 19.7 per cent in mining production.

Non mining output increased by 3.5 per cent. Inflation decreased from 3 per cent in March to 2.8 per cent in April 2016. 

Low domestic demand pressures and subdued foreign price developments contribute to the positive inflation outlook in the medium term.

The release further states this outlook is subject to downside risks emanating from sluggish global economic activity and the resultant low commodity prices.

It could, however, be adversely affected by any unanticipated large increase in administered prices and government levies as well as in international oil and food prices beyond current forecasts.

“The current state of the economy and both the domestic and external economic outlook, including the inflation forecast, suggest that the prevailing monetary policy stance is consistent with maintaining inflation within the Bank’s medium-term objective range of 3 - 6 per cent,” states the release.

In the circumstances, the Monetary Policy Committee decided to maintain the Bank Rate at 6 per cent.

Monetary policy is also aligned with the need to safeguard financial stability. In this respect, credit growth is considered to be at a sustainable level; it is posing no threat to financial stability. ENDS