IMF raises forecast economic contraction for Botswana
The International Monetary Fund (IMF) now expects the local economy to contract by 9.6% this year, up from the -5.4% forecast made in April, BusinessWeek has established. The institution, however, now also expects the country to bounce back higher in 2021 to 8.6% growth, from the April forecast of a 6.8% bounce back. The latest numbers are contained in a subSaharan Africa economic outlook issued by the IMF on Monday.
The IMF’s revised projections are still below government’s own forecasts, which predict that the economy will shrink by 13.1% this year.
However, government expects the economy to bounce back by 3.9% in 2021, while the IMF is more optimistic at 6.8%.
Should the figures projected by the IMF and government be realised, 2020’s contraction will be the worst in the country’s history since the -7.7% recorded in 2009 when the global recession hit local shores.
The revised projections for Botswana are in line with the IMF’s expectation of countries whose economies will be hardest hit by the pandemic in sub-Saharan Africa.
“Across country groupings, growth is expected to fall the most in tourism-dependent and resourceintensive countries,” the IMF said.
“The outlook for 2020–21 is considerably worse than expected in April and subject to much uncertainty.
“It reflects a weaker external environment and measures to contain the COVID-19 outbreak, which has been accelerating in the past few weeks in several sub-Saharan African countries.”
The IMF said countries’ policies should remain focused on safeguarding public health, supporting people and businesses hardest hit by the crisis, and facilitating recovery.
However, due to their limited funds, countries should also move from broad-based support to their economies and towards targeted sectors.
“These policies should be targeted to the poorest households and sectors most hit by the health crisis.
Countries that can afford it – those with more fiscal space – could provide support to certain activities – for example, to sectors with large positive spillovers to the rest of the economy, which could contribute to a nascent recovery while helping to limit the accumulation of debt,” the IMF further said.
In an online press briefing, the IMF’s director of African Department, Abebe Aemro Selassie said sub-Saharan African countries had acted “swiftly and aggressively” to support their economies through appropriate monetary and fiscal policy initiatives.
The IMF noted Botswana as being amongst countries where central banking authorities temporarily relaxed prudential norms to give commercial banks greater flexibility. Government’s multibillion Pula response has also involved wage subsidies, tax deferrals, a loan guarantee programme and support to the SMME and informal sector.
A draft Economic Recovery and Transformation
Plan leaked recently proposes to spend up to P40 billion in longer term economic initiatives. The Plan is due to be discussed further in Cabinet before Parliament is approached for approval.