Standard Chartered Bank forecasts that the domestic economy will achieve a growth rate of 3.9 percent in 2024, a figure that falls below the government’s projections.
The government expects the local economy to rebound to 4.2 percent and 5.4 percent in 2024 and 2025, respectively.
Standard Chartered Bank has revised its growth projections for Botswana in 2024, raising them by 1 percentage point to 3.9 percent. According to the bank’s economist for Africa, Emmanuel Kwapong, this adjustment reflects the impact of the stimulus budget presented by the Minister of Finance, Peggy Serame, in early February.
In its projections, Kwapong highlighted that the bank also factored in the softer growth seen in the second half of last year.
“We were expecting a fairly loose fiscal policy to be implemented,” said Kwapong.
“At a time when the diamond sector is not looking good, the government uses the public sector to support growth.”
Kwapong noted that this growth projection was initially anticipated at the beginning of the New Year. However, he expressed surprise when the government introduced a stimulus budget, prompting the bank to revise its forecasts accordingly.
“We do, however, see some risks, particularly in the execution of the development budget, it is a risk that we will keep an eye on,” Kwapong told the local media on Thursday.
“On the diamond sector, we have seen the first cycle of De Beers quite encouraging.”
However, he said it is still early to derive a conclusion from this as uncertainty is still prevalent.
Kwapong emphasised that in 2024, Botswana’s economy would primarily be propelled by the fiscal policy measures that authorities intend to implement.
“The issue around the economy is that it is still highly dependent on diamonds and also very much on public spending,” he said.
“That exposes the economy to external shocks.”
Kwapong emphasised that this highlights the urgency required to implement reforms aimed at fostering private sector growth and facilitating diversification.
StanChart anticipates the fiscal deficit for the 2024/2025 period to be approximately 2.3 percent, which contrasts with the government’s projection of 2.8 percent.
The government’s expansionary budget, Kwapong warned could add to some inflationary pressures.
Moreover, he said the bank anticipates higher oil prices which he said poses risks to inflation.
“From a monetary policy perspective, we have now revised our projections and do not see the Bank of Botswana cutting interest rates any longer,” said Kwapong.
“Initially we had expected a 50 basis points cut before the budget. We think the central bank will remain cautious regarding interest rate cuts.”
According to Kwapong, it came as a surprise when BoB cut the Monetary Policy Rate (MoPR) in December last year.
At the February Monetary Policy Committee (MPC) meeting, the MoPR was maintained at 2.4 percent.
Kwapong said part of this reflects the cautionary approach by the central bank following the expansionary budget.
“From our perspective, we think the central bank will keep interest rates low for quite some time,” said Kwapong.
