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HOPEFUL: Moses Pelaelo


Economy projected to grow by 8.8% this year

Bank of Botswana Governor, Moses Pelaelo, says the central bank forecasts the domestic economy to grow by 8.8 percent this year.

Speaking during the launch of the Monetary Policy Statement of Tuesday, the governor said the improvement, which is largely a reversal of the stated contraction of 7.7 percent in 2020, is premised on conducive financing conditions associated with accommodative monetary policy and a sound financial environment.

“In addition, the mid-term review of the National Development Plan 11, supported by effective implementation of the Economic Recovery and Transformation Plan, provides added impetus for positive economic prospects,” said Pelaelo.

Last year, Botswana’s output contracted by 6.4 percent in the twelve months to September 2020, compared to an increase of 3.7 percent in the year to September 2019.

“Both the mining and non-mining production fell, mainly resulting from the impact of the COVID-19 pandemic containment measures. Mining output declined significantly by 21.9 percent in the year to September 2020, compared to a 1.4 percent growth in the year to September 2019,” said the governor.

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During the same period, non-mining GDP contracted by 4.7 percent compared to a growth of 3.9 percent in the corresponding period in 2019.

Meanwhile, domestic inflation is said to have been below the lower bound of the objective range of 3–6 percent in 2020, which Pelaelo noted was broadly consistent with earlier projections.

It is expected that inflation will revert to within the Bank’s 3–6 percent medium-term objective range from the second quarter of 2021.

The governor said the forecast takes into consideration the expected increase in value-added tax, fuel levy, electricity tariffs, Botswana Housing Corporation rentals, as well as the introduction of the sugar tax.

“The forecast also takes into account the likely impact on domestic fuel prices of the expected increase in international oil prices, the anticipated strengthening of commodity prices generally, the upward revision in the South African inflation forecasts, and the base effects associated with the decrease in fuel prices in 2020,” he explained.

With projections suggesting that inflation will revert to the medium-term range, Pelaelo said indications are that inflation would move closer to the upper bound of the objective range.

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