03 Nov 2019

Gross Domestic Product (GDP) has increased by 3.9 per cent in the 12 months period to June 2019, as compared to a faster expansion of 4.9 in the corresponding period in 2018.

This was said by Bank of Botswana (BoB) governor, Mr Moses Pelaelo when delivering the bank’s Monetary Policy Committee report in Gaborone on October 31.

Mr Pelaelo indicated that the lower increase in output was mainly attributable to deceleration in growth of the mining sector as growth in non-mining GDP also slowed in the review period.

He highlighted that mining output grew by 1.4 per cent in the period under review, compared to an increase of 5.6 per cent in the corresponding period in 2018.

The BoB governor said the lower increase was due to the significant reduction in growth of the diamond output from 11.8 per cent to one  per cent in the review period.

The decrease in diamond output, he said, was mainly due to the decline in production by Orapa mine, following a planned plant shutdown in April 2019.

Mr Pelaelo said the non-mining GDP grew by 4.2 per cent in the 12-month period to June 2019, as compared to 4.8 per cent in the corresponding period ending in June 2019.

He attributed the lower expansion in non-mining GDP largely to a slower growth of the trade, hotel and restaurants sector, which mainly reflected a weak performance in downstream diamond industries.

Mr Pelaelo noted that government projections indicated that domestic economic activity would expand by 4.3 and 4.6 per cent in 2019 and 2020 respectively.

He said the significant influences on domestic economic performance included conducive financial environment that facilitated policy transmission, intermediation and risk mitigation.

“It is anticipated that the increase in government spending as well as implementation of initiatives such as doing business reforms, should also be supportive of economic activities, hence the economy is projected to operate close to, but below full capacity in the short to medium term, thus not adding to inflationary pressure going forward,” he said.

Mr Pelaelo further stated that global output growth was expected to ease to three per cent in 2019, the lowest since the global financial crisis of 2008.

The slowdown, he added, was due to, among other factors, broad-based deceleration in growth of industrial output and trade as well as low business confidence and weaker investment amid rising trade and geopolitical tensions.

Further, the BoB governor said the current state of economy and outlook for both domestic and external economic activity suggested that prevailing monetary policy stance was consistent with inflation being within the objective range of 3-6 per cent in the medium term. He said inflation had thus increased from 2.9 per cent in August to three per cent in September, but it was projected to revert to within the objective range in the second quarter of 2020.

Meanwhile, BoB has maintained the bank rate at 4.75 per cent. ENDS