| Imagery Source: The Blue Diamond Gallery |
| Information Source: African Development Bank |
| Recent macroeconomic and financial developments |
| Real GDP growth shrank to 2.7% in 2023 as water and electricity production declined and the diamond trade slowed. The declines reflected drought conditions and weak global diamond demand. Average inflation fell to 5.3% in 2023, within the Bank of Botswana’s 3%–6% acceptable range, reflecting downward domestic fuel price adjustments and lower imported inflation. In April 2024, with inflation expectations well anchored, the central bank maintained its monetary policy rate at 2.4% after having reduced it by 25 basis points in December 2023. |
| The 2023/24 fiscal deficit widened to 2.5% of GDP, driven by lower -than -expected mineral earnings and higher -than -planned recurrent spending. Public debt was sustainable at 22.0% of GDP. The decline in the current account surplus to 0.9% of GDP in 2023 reflected lower mineral exports and Southern African Customs Union (SACU) revenues. International reserves improved to $4.8 billion in January 2024 (8.7 months of import cover), up from $4.0 billion at the end of 2022 (7.6 months). Year on year, the pula appreciated by 0.8% against the South African rand and depreciated by 3.4% against International Monetary Fund Special Drawing Rights in March 2024. |
| The banking sector’s capital adequacy ratio averaged 19.7% in 2023, above the 12.5% prudential floor. The nonperforming-loan-to-gross-loan ratio was stable at 3.7% in December 2023 against 3.8% in December 2022. |
| Botswana’s poverty headcount ratio shrank from 17.0% in 2019 to 14.5% in 2022. In 2021, 20.8% of the population was multidimensionally poor. Unemployment was high, at 25.9% (25.4% in 2022), driven by 34.4% youth unemployment (third quarter of 2023). |
| Outlook and risks |
| Growth is expected to rebound to 4.0% in 2024 as diamond sales recover. The outlook’s downside risks include higher than expected inflation from supply chain disruptions as geopolitical tensions rise, weaker diamond trade if demand remains depressed, El Niñodriven weather patterns, and the potential for persisting weak economic conditions in South Africa. With the economy operating below full capacity, inflation may fall to 4.5% in 2024, staying within the central bank’s range. A narrowed fiscal deficit of 1.8% of GDP in 2024/25 will be supported by improved public finance management, business environment reforms, and the successful implementation of the two-year Transitional National Development Plan. A current account surplus is projected, with higher diamond earnings and SACU revenues. Unemployment may be addressed in part by the 2023 De Beers diamonds sales deal, in which Botswana’s higher control of diamond production (from 25% to 50%) is expected to generate new jobs along the industry’s value chains. |
| Reform of the global financial architecture |
| Botswana is stable with strong institutions and democratic governance. The country prudently manages its diamond flows through the Pula Sovereign Wealth Fund and has been diversifying away from mining. The contribution of non-minerals in real GDP rose from 71.1% in 2013 to 76.2% in 2023. Over the same decade, the mining sector’s GDP contribution fell from 20.0% to 16.7%, and its share of employment dropped from 5.8% to 1.4%. Industry’s contribution fell from 18.2% to 16.6%, and its share of employment dropped from 31.4% to 16%. Agriculture’s GDP contribution declined from 2.0% to 1.6%, but its share of employment rose from 3.1% to 9.8%. Services’ contribution increased from 59.6% to 65.1%, and its share of employment rose from 39.7% to 56.1%. To advance its structural transformation, Botswana should target higher value addition in sectors with the highest job creation potential. |
| To close the 41% financing gap in its $4.7 billion public investment program and position itself to take full advantage of the redesigned global financial architecture, Botswana could emphasise reforms that sustainably improve its legal and operational efficiencies to attract higher private capital flows. Botswana could also strengthen and mainstream the technical skills necessary for effective engagement in global financial negotiations and the identification of well-targeted bankable projects for investment. |
| For the full document, click the link below |
| Botswana: Economic Outlook and GDP |
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