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FNBB predicts 3.9 percent economy growth

First National Bank Botswana (FNBB) forecasts the local economy will grow by 3.9 percent in 2019 and by 3.7 percent next year.

However, the figures are lower than government’s economic growth estimates of 4.2 percent and 4.8 percent for 2019 and 2020 respectively.

The Financial Stability Report (FSR), released this week, suggests the domestic economic performance will be influenced by factors such as the accommodative monetary policy and anticipated increase in government spending.

Given the narrow export base, the FSR warns that the economy remains vulnerable to external shocks, especially in the diamond market, which has recently seen a decline in sales due to high inventories.

Writing in the bank’s annual report, FNBB Chief Executive Officer, Steven Bogatsu says the numbers they predict will be driven by services sector, which is expected to contribute 40 percent to economic growth.

He says this contribution will be led primarily by investments in transport and communications, trade and finance and business services.

“However, this growth is likely to be constrained by limited output and export-oriented activities in view of the lack of robust private sector investments needed for economic diversification to reduce dependence on diamond revenues,” said Bogatsu.

At 17 percent of the GDP, Bogatsu says mining remains the second highest contributor to growth and is expected to contribute an average of 30 percent of fiscal revenue over the next three years.
Bogatsu feels the continued reliance on mineral exports, and on diamonds in particular, poses a risk to Botswana’s economy, especially during subdued global growth and plateauing commodity prices.

The situation is not helped by the under-performance of the manufacturing and agriculture sectors, which have a combined contribution of around 7 percent.

Also, Bogatsu says unfavourable climatic conditions, in the context of global warming, will further weigh on agricultural output, while opportunities for sustainable manufacturing remain largely unidentified.

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