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BoB maintains 5% rate

Bank of Botswana (BoB) has decided to maintain the bank rate at 5 per cent, BoB governor Mr Moses Pelaelo had said.

He said the decision was taken by the central bank’s Monetary Policy Committee (MPC) meeting held on June 27, 2019.

Mr Pelaelo told members of the media on Thursday that in April and May 2019 inflation was below the lower bound of the Bank’s objective range of 3  to 6 per cent, mainly reflecting base effects associated with the increase in public transport fares and electricity tariffs in the second quarter of 2018.

“Nonetheless, in the medium term, inflation is forecast to remain within the Bank’s 3 to 6 per  cent objective range,” he said.

The positive inflation outlook in the medium term, Mr Pelaelo said was due to subdued domestic demand pressures and the modest increase in foreign prices.

He said this outlook was subject to upside risks emanating from the potential rise in administered prices and government levies and or taxes, beyond current forecasts.

“However, modest growth in global economic activity, technological progress and productivity improvement present downside risks to the outlook,” he said.

Furthermore, the BoB governor said Real Gross Domestic Product grew by 4.5 per cent in 2018, compared to a lower expansion of 2.9 per cent in 2017. This, he said was attributable to the continued good performance in non-mining sectors and the recovery in mining output.

Compared to a contraction of 11.1 per cent in 2017, Mr Pelaelo said mining output expanded by 7.4 per cent in 2018, whilst non-mining Gross Domestic Product (GDP) grew by 4.1 per cent in 2018, compared to 4.8 per cent in 2017. In 2019, the governor said GDP was projected to increase by 4.2 per cent.

“The significant influences on domestic economic performance include conducive financing conditions as indicated by accommodative monetary policy and sound financial environment that facilitate policy transmission, intermediation and risk mitigation,” he said.

Moreover, the governor said it was also anticipated that the increase in government spending, as well as implementation of initiatives such as the doing business reforms, should also be supportive of economic activity.

Compared to 2018, he said businesses, as per the latest Business Expectation Survey, were also about economic developments in 2019 and expected a higher rate of growth.

Therefore, Mr Pelaelo said overall, the economy was projected to operate close to, but bellow full capacity in the short to medium term, ‘thus posing no upside risk to the inflation outlook.’

Regarding global output, he said it was expected to ease to 3.3 per cent in 2019, from an estimated expansion of 3.6 per cent in 2018.

“The moderation in global growth was due to various factors, including inter-alia: trade and geopolitical tensions which have the possibility to hamper confidence, investment and growth, continuing policy uncertainty; possible slower growth in China, a “no-deal” Brexit, tightening financial conditions and high debt levels,” he said.

Regionally, the governor said South African Reserve Bank revised the forecasts for GDP growth for 2019 downwards to 1 per cent from 1.3 per cent, as a result of the larger than expected slowdown in the first quarter, attributable to weak business and consumer confidence.

The current state of the economy and the outlook for both domestic and external economic activity, he said suggested that the prevailing monetary policy stance was consistent with inflation reverting to within the objective range of 3 to 6 per cent in the medium term. ENDS

Source : BOPA

Author : Lorato Gaofise

Location : GABORONE

Event : MEETING

Date : Jul 01 Mon,2019

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