03 May 2018

Upon making assessments of the domestic economic activity and the global economic currents, the Bank of Botswana retained a steady bank rate of five per cent.

Announcing the bank’s monetary policy committee decision at a media briefing recently, Bank of Botswana governor, Mr Moses Pelaelo said the present state of economy  and  the  outlook  for  both  domestic  and  external economic activity suggested that the prevailing monetary policy stance was consistent with managing inflation to maintain it within the range of  three to six per cent in the medium term hence the decision to keep the bank rate at five per cent.

In February, the governor stated that inflation fell from 3.2 per cent to 2.8 per cent in March 2018. He said the outlook for price stability remained positive as inflation was within the projected ranges.

Furthermore, Mr Pelaelo noted that subdued domestic demand pressures and the modest increase in foreign prices contributed to the positive inflation outlook in the medium term.

The outlook, he said, was subject to upside risks which resulted from growing global economic activity and the potential rise in commodity prices beyond the current forecasts.

He said should there be any substantial unanticipated upward adjustment in administered prices and government levies and taxes, they would present upside risks to the inflation outlook.

He also explained that modest demand pressures and the restrained increase in salaries would present downside risks to the outlook.

Moreover, the governor further delved in Botswana’s real Gross Domestic Product (GDP) which he noted grew by a sluggish 2.4 per cent in 2017 compared to a faster growth of 4.3 per cent in 2016.

He attributed the slower growth to a lower increase of 4.2 per cent in non-mining activity when compared to 5.5 per cent in the previous year.

On mining output, Mr Pelaelo said it reduced significantly by 11.2 per cent in 2017 compared to a decline of 3.5 per cent in 2016.

However, he expressed optimism and projected that the GDP would expand in the short-to-medium term, driven largely by growth in the services sectors and recovery in mining activity on a global perspective.

Furthermore, the central bank governor said the overall economy was expected to operate close to, but below full capacity in the medium term.

“The projected accommodative monetary conditions in the domestic economy and expansion in government expenditure in the 2018/2019 fiscal year as well as stability in water and electricity supply are expected to support economic activity in the non-mining sectors,” he stated.

On the international scale, he said global output growth was projected at 3.9 per cent in 2018 and 2019 which reflected the expected broad-based improvement in the economic performance.

However, he cautioned that “protectionist trade policies, potential build-up of financial vulnerabilities induced by easy financial conditions, geopolitical tensions and adverse weather could negatively affect the medium-term growth prospects.” ENDS