Diamond exports will be the main driver of economic growth in Botswana. Diamond production is expected to increase by 14% this year. However, the increase in imports will remain moderate as domestic demand slows.
Botswana’s real GDP growth is expected to slow to 4.6% in 2022 and 4.2% in 2023, Fitch Solutions Country Risk & Industry Research estimated in a report titled ‘Diamond Exports To Support Botswana’s Economy Over 2022’ and released earlier this week.
“Botswana’s real GDP growth is expected to slow to 4.6% in 2022 from 11.4% in 2021, as high inflation reduces consumer purchasing power and tighter monetary conditions limit investment growth,” the paper says.
Diamond exports, whose production is expected to increase by 14% in 2022, will be the main driver of economic growth in 2022, while the increase in imports will remain moderate in a context of slowing domestic demand.
Household consumption is expected to grow by 1.8% for the year as a whole, compared to 8% in 2021, due to “strong inflationary pressures” from rising fuel and food prices which will erode consumer purchasing power.
Fitch Solutions also believes that the tightening of monetary policy is likely to dampen investment growth. Gross fixed capital formation is expected to grow by only 3.4% during the year, well below the annual average of 6.2% recorded in the decade before covid-19.
For 2023, Botswana’s real GDP growth is expected to slow to 4.2%, due to a weaker outlook for diamond production.
However, the expected decline in inflation would help boost household consumption. The signing of a new supply contract between the government and the South African diamond conglomerate De Beers, expected next year, should also boost investment in the country’s mining sector.
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