Diamond crisis weighs on household spending

Consumer spending in Botswana is expected to remain subdued through 2025 and into 2026 as ongoing challenges in the diamond industry weigh on the broader economy and household disposable incomes, according to the latest outlook by Business Monitor International (BMI). “We hold a relatively weaker outlook for the Botswana consumer over 2025, as high unemployment, limited government support and economic uncertainty stemming from diamond market challenges will continue to constrain household spending power,” BMI said. The firm projects total household spending will grow by 2.3 percent year-on-year in 2025, slightly below the 2.4 percent growth estimated for 2024 and well under the 3.2 percent annual average posted before the COVID-19 pandemic. BMI expects a modest rebound in 2026, forecasting household spending growth of 2.7 percent as the diamond industry gradually stabilises and economic diversification initiatives begin to yield results, boosting employment prospects and consumer confidence. “Our forecast for an increase in growth in consumer spending in Botswana in 2025 is in line with our Country Risk team, which forecasts that the Botswanan economy will contract by 1 percent over 2025, before returning to growth of 2.4 percent over 2026,” BMI said. “This economic trajectory reflects the continued challenges in the diamond industry, which accounts for approximately one-third of GDP and more than 80 percent of export earnings.” Persistently high unemployment, fiscal constraints limiting social welfare expansion, and US tariffs further pressuring the country’s key export sector will keep household disposable incomes under strain throughout 2025, the report said. A more meaningful recovery is only expected in 2026, when diversification efforts gain traction. BMI also flagged household debt as a significant risk to the consumer outlook. Elevated debt levels, it said, are limiting borrowing capacity and squeezing disposable incomes — a challenge compounded by higher interest rates. “This is particularly true as debt servicing costs rise in response to increases in interest rates. In many markets, central banks rapidly hiked interest rates during the 2022–2023 high inflationary period, reaching levels to which most households have not been accustomed over the past decade,” BMI said. While many markets are expected to return to terminal rates in 2025, BMI cautioned that the process could take until 2026, keeping debt servicing costs higher for longer. If inflationary pressures accelerate, central banks may revert to a hawkish approach, potentially reigniting the debt burden for households. The report warned that rising household indebtedness warrants close monitoring, especially as economic diversification progresses slowly and unemployment remains high. “With purchasing power expected to stagnate through 2025 and only gradually recover thereafter, there is a risk that some households may increasingly turn to credit to maintain consumption levels, accelerating debt accumulation in the medium term,” BMI said.

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Diamond crisis weighs on household spending

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