rationalizing the SOE sector and address- ing constraints that hinder private sector BOTSWANA Key conditions and engagement in trade and investment are central to the recovery. challenges Table 1 2021 Botswana has historically enjoyed Population, million 2.4 strong and stable growth since inde- Recent developments GDP, current US$ billion 16.5 pendence supported by the discovery GDP per capita, current US$ 6849.4 of large diamond deposits and pru- Botswana’s economy rebounded strongly a 14.5 International poverty rate ($1.9) dent use of the proceeds. The limita- in 2021 led by the mining sector. GDP a 36.5 tions of the existing diamond sector- growth is estimated to have bounced Lower middle-income poverty rate ($3.2) a 59.1 led development model have become back to 12.1 percent in 2021, following Upper middle-income poverty rate ($5.5) Gini index a 53.3 increasingly pronounced: growth re- a contraction of 8.5 percent in 2020, dri- School enrollment, primary (% gross) b 103.2 mains sluggish, job creation is low, ven by a rebound in diamond activity. b 69.6 and inequality is high. Weakened glob- Botswana’s economy grew 13.5 percent Life expectancy at birth, years al demand has kept diamond proceeds over Q1-Q3 2021 year-on-year (y-o-y). Total GHG Emissions (mtCO2e) 59.1 below pre-global financial crisis levels Supported by the rollout of COVID-19 Source: WDI, Macro Poverty Outlook, and official data. and competition from synthetic dia- vaccines, domestic consumption also sig- a/ Most recent value (2015), 2011 PPPs. b/ WDI for School enrollment (2015); Life expectancy monds and higher production costs nificantly contributed to the recovery. Di- (2019). have added further pressures. amond prices returned to pre-pandem- Since 2015, continued fiscal expansion to ic levels after a sharp decline in 2020. support growth has created large fiscal Diamond mining increased 35.4 percent Botswana’s economic growth is projected deficits, eroded buffers and weakened the over Q1-Q3 2021, contributing 6.1 percent to moderate to 4.1 percent in 2022 follow- external position. Low capital accumula- to overall GDP growth. Non-mining sec- tion and sluggish productivity constrained tors showed more mixed recovery tra- ing a 12.1 percent rebound last year. De- growth in the non-diamond economy. Un- jectories. The hospitality sector remained spite the headwinds created by employment remains high, as the private affected by intermittent restrictions. Un- COVID-19, economic growth surpassed sector struggles to create jobs due to high employment peaked from 24.5 percent in expectations. Structural policies to deliv- costs/barriers to doing business and the Q42020 to 26 percent in Q42021. Pover- mismatch between poor domestic supply ty is projected to have declined to 56.6 er a stronger, resilient, equitable and sus- of skills and high demand. percent in 2021 after a projected sharp tainable recovery remain key to tackle COVID-19 exacerbated existing econom- increase in 2020, based on the upper among others the unemployment rate of ic and social challenges, setting back middle-income country poverty line and 26 percent and the projected poverty rate some gains made in alleviating poverty, remains high compared to other upper of 56.6 percent in 2021, based on the up- underscoring the urgent need for a sig- middle-income countries. nificant shift towards a more diversified CPI averaged 6.7 percent in 2021 com- per middle-income country poverty line. pared to 1.9 percent in 2020. Inflationary and export-led economy, with the pri- vate sector playing a leading role. Im- pressures were on an upward trajectory proving public sector spending efficiency, driven by adjustments to regulated FIGURE 1 Botswana / Real GDP growth and contributions FIGURE 2 Botswana / Actual and projected poverty rates to real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 0.6 70 90000 80000 0.4 60 70000 0.2 50 60000 40 50000 0.0 30 40000 -0.2 30000 20 -0.4 20000 10 10000 -0.6 2019Q1 Q3 2020Q1 Q3 2021Q1 Q3 0 0 Gross Capital Formation Public Consumption 2009 2011 2013 2015 2017 2019 2021 2023 Private Consumption Exports International poverty rate Lower middle-income pov. rate Imports GDP Growth Upper middle-income pov. rate Real GDP pc Source: Statistics Botswana. Source: World Bank. Notes: see table 2. MPO 1 Apr 22 prices, notably utilities, VAT, Botswana poised to remain robust, supported by ex- Housing Corporation rentals, and in- ternal demand. Investment in renewable creases in domestic fuel prices. Bank of Outlook energy projects will support growth and Botswana maintained an accommodative contribute to removing the energy supply monetary policy stance, maintaining the The outlook is not without substantial constraint to higher private sector activity. repo rate at 3.75 percent. The current downside risks as the emergence of new Abundant copper reserves coupled with account deficit narrowed in 2021 to an COVID-19 variants pose a threat to the re- record-high copper prices will add the estimated 2.1 percent of GDP, buoyed covery. Prolonged higher inflation leading needed impetus. Implementation of struc- by the rebound in diamond exports. to monetary tightening around the world tural reforms will support growth over the Foreign exchange reserves are estimat- could slow the recovery exacerbated by the medium term as Government pursues fis- ed to have increased from P58.8 bil- Ukraine-Russia conflict through high food cal consolidation. Growth is expected to lion (US$4.9 billion) in December 2020 and fuel prices. Muted mineral receipts average 4 percent over 2023-24. to P61.1 billion (US$5.2 billion) in No- against envisaged lower SACU receipts The current account deficit is expected to vember 2021 with sound reserves at 10 would dampen the fiscal position. Poverty narrow to 0.6 percent of GDP in 2022 and months of import cover. levels are projected to reach 56.2 percent in record a surplus of 1.6 percent of GDP in With the Government channeling fiscal 2022 (measured using the upper-middle- 2023 as the rebound in diamond produc- resources towards healthcare and sup- income country poverty line, US$5.5/per- tion and favorable terms of trade owing porting the economy, the 2020 projected son/day in 2011PPP). to subdued diamond supply in Russia an- deficit increased to 9.4 percent of GDP Growth is envisaged to moderate in 2022 chor the projected drop in SACU revenues. hence further Government Investment but still maintain a robust recovery at 4.1 The fiscal deficit is expected to decline to Account drawdowns, dropping balances percent as the base effects from the pan- 4.2 percent of GDP in FY2022/23, driven from US$ 1.6 billion in 2020 to an all- demic shock fade. Progress in vaccination by higher revenue collection while expen- time low of US$ 0.8 billion as of Septem- will support economic activity, especially diture remain under pressure. Public debt ber 2021. Debt is projected to reach 25.5 in the non-mining sectors that have con- is estimated to reach 27.2 percent of GDP percent of GDP in 2021 from 23.9 percent tinued to be significantly affected by the this year and 26.8 percent by 2023, driven in 2020. pandemic in 2021. Diamond activity is also by external borrowing. TABLE 2 Botswana / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 3.0 -8.5 12.1 4.1 4.0 4.0 Private Consumption 3.5 -2.7 6.2 6.0 4.2 4.0 Government Consumption 9.8 3.6 0.7 -5.2 -2.2 -1.8 Gross Fixed Capital Investment 10.2 -7.7 7.0 4.1 4.0 4.1 Exports, Goods and Services -7.1 -18.1 44.0 9.2 8.3 7.3 Imports, Goods and Services 11.9 5.2 5.1 5.0 4.9 4.8 Real GDP growth, at constant factor prices 3.2 -8.9 12.1 4.1 4.0 4.0 Agriculture 3.0 -1.7 3.0 3.0 2.8 2.6 Industry -1.5 -20.6 26.7 4.6 4.4 4.4 Services 6.8 -0.8 4.1 3.8 3.8 3.8 Inflation (Consumer Price Index) 2.8 1.9 6.7 7.5 4.5 4.5 Current Account Balance (% of GDP) -8.4 -10.6 -2.1 -0.6 1.6 1.9 Net Foreign Direct Investment (% of GDP) 1.3 -0.6 0.6 0.8 1.2 1.2 a Fiscal Balance (% of GDP) -6.2 -9.4 -5.7 -4.2 -0.5 0.0 Debt (% of GDP) 21.2 23.9 25.5 27.2 26.8 26.4 a,b Primary Balance (% of GDP) -5.5 -8.7 -4.9 -3.4 0.3 1.1 c,d International poverty rate ($1.9 in 2011 PPP) 12.0 15.0 12.3 12.1 11.5 11.2 c,d Lower middle-income poverty rate ($3.2 in 2011 PPP) 32.5 37.1 33.1 32.5 31.8 31.4 c,d Upper middle-income poverty rate ($5.5 in 2011 PPP) 56.2 59.4 56.6 56.2 55.8 55.1 GHG emissions growth (mtCO2e) 0.6 -1.4 3.7 0.4 0.3 0.4 Energy related GHG emissions (% of total) 17.2 15.7 16.8 17.2 17.4 17.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Fiscal balances are reported in fiscal years (April 1st -March 31st). b/ Refers to Public and Publicly Guaranteed debt. c/ Calculations based on 2015-BMTHS. Actual data: 2015. Nowcast: 2016-2021. Forecasts are from 2022 to 2024. d/ Projection using neutral distribution (2015) with pass-through = 0.87 based on GDP per capita in constant LCU. MPO 2 Apr 22