06 Dec 2016

The President Lt Gen. Dr Seretse Khama Ian Khama has said Botswana remains at risk from volatility in global commodity prices as the economy remains dependent largely on minerals, especially diamonds.  

Delivering State-of-the-Nation Address on Monday (December 5), the President said according to the International Monetary Fund (IMF) most recent World Economic Outlook report, modest global growth rates of 3.1 per cent for 2016 and 3.4 per cent for 2017 are expected.

However, he said these projections should be treated with caution.

The president said despite initial optimistic projections, the domestic economy last year ended up with a negative growth of 0.3 per cent , having been driven down by a 19.7 per cent decline in mineral revenues linked to weaker global demand, aggravated by drought and the challenges Botswana experienced in water and energy sectors.

“We anticipate an overall domestic growth rate of 3.5 per cent for this year and 4.1 per cent in 2017,” he said.

The president said while the liquidation of the BCL Group of companies will continue to have economic and social implications, particularly in the area of employment, it is anticipated that it will have limited direct impact in terms of exports, government revenues and overall growth.

“Government shall, nonetheless, continue to closely monitor developments with respect to the BCL liquidation process with the view of updating our macroeconomic projections as may be necessary,” he said.

President Khama said the negative effects of the liquidation of the BCL Group may reduce this figure, its medium to long term impact on economic growth, exports and government revenues should be manageable.

He said due to difficulties facing the mineral sector, domestic growth is expected to be driven by the non-mining sectors, more especially in Trade, Hotels and Restaurants Transport and Communication and Finance and Business Services.

The president said the inflation rate is forecast to remain within the Bank of Botswana’s 3 – 6 per cent objective range.

“In the current financial year the rate fell below our target, averaging 2.7 per cent between April and September,” he said.

The central bank has in light of the positive domestic inflation outlook, maintained an accommodative monetary policy stance, with the Bank Rate being reduced to 5.5 per cent.

“During the coming year we anticipate that sluggish global economic activity with low commodity prices will continue to put downward pressure on domestic inflation,” he said. ENDS