27 Jul 2022

Bank of Botswana (BoB) is anticipating inflation rate to remain above  the  bank’s 3-6 per cent objective range in the short term, says the bank’s governor  Mr  Moses  Pelaelo.

 Briefing the media on Botswana’s economic status yesterday, Mr Pelaelo said the inflation outlook was subject to significant upside risks including the continuing adverse  impact  of the COVID 19 pandemic, constrained supply relative to demand and regular annual  price adjustments, notably of administered prices.

 “These risks are however moderated  by the  possibility of weak domestic and global  economic activities and restrained commodity prices, hence the inflation rate is expected to revert  to within the  objective  range in the third  quarter  of  2022,”  he said.

 Mr Pelaelo  however said the global inflationary pressure was expected to remain elevated  for the rest of the year against the  background of prolonged supply chain  disruptions and  high  energy  prices as well as other input  costs.

 The anticipated inflationary pressures also stemmed from improved global demand conditions as  most  economies  progressively deployed effective  COVID-19 vaccines and reopened, he explained adding that the escalation of geopolitical tensions and subsequent sanctions imposed on Russia also added to the inflation threat and uncertainty.

“Thus, inflation for advanced economies is forecast to increase from 3.1 per cent  in 2021  to 3.9 per cent in 2022 while emerging market economies are forecasted to increase from 5.7 per cent to 5.9 per cent  in the same  period,”  he said.

Mr Pelaelo said most  economies were likely to tighten their monetary policies to control inflationary pressures  resulting  from the  pandemic-induced supply and demand mismatches that  could  persist  for some time.

Domestically, he said Botswana’s real  GDP grew  by 8.6 per cent in the 12  months  to  September  2021 compared to a 7.3  per cent contraction experienced the previous year. He said the increase in output was attributable to the expansion in production of both the  mining  and non-mining  sectors.

“Mining output increased by 15.6 per cent in the year to September 2021 compared to a contraction of 22.2 per cent recorded in the year to September 2020,” he said.

 My Pelaelo said non-mining GDP grew by 6.9 per cent compared to a decrease of 2.8 per cent in the corresponding period in 2020.

He said water  and electricity  output  increased significantly by 12.8 per cent  in 2021 compared to a decrease of  4.3 per cent recorded  in the  previous 12  months.

The expansion, he said,  was due to  the  13  per cent  growth in output  of the electricity  supply  sub-sector owing to an increase  in local  power production  and acceleration in water connection, treatment  and  supply output following completion of the  Masama pipeline.

Regarding the accommodation and food services sector, Mr Pelaelo said output declined by 8.7 per cent.The  general  unfavorable  performance of the  sector  was primarily  due to low  hotel  occupancy rates as a result  of the  COVID 19 pandemic, he said.ENDS