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Economy expected to rebound next year

The economy is expected to rebound at 7.7 per cent in 2021 following a contraction of 8.9 per cent this year mainly due to challenges emanating from the COVID-19 pandemic.

In his State of the Nation Address November 9, President Dr Mokgweetsi Masisi said this year’s poor economic performance was attributable to decline in sectors such as mining, trade, hotels and restaurants, construction, manufacturing and transport and communications.

The President said the recovery forecast for 2021 would be driven by a rebound in growth of the mentioned sectors.  

Mining is projected to grow at a rate of 14.4 per cent, trade, hotels and restaurants at 18.8 per cent while transport and communications is expected to grow at 4.2 per cent.

“The recovery will also be supported by the Economic Recovery and Transformation Plan currently being implemented by government,” he said.

President Masisi said the projections depended on the duration of the COVID-19 pandemic and related restrictions.

“These containment measures have the effect of reducing spending by firms and households and causing supply-chain disruptions,” he said.

He further said recovery would be influenced by confidence effects on households and businesses, sectoral transformation and changes in work patterns as well as prospects for upturn in global financial markets and commodity prices.
“Despite the challenges of COVID-19, there still remains the delicate balance of opening the economy whilst containing the disease burden,” he said.

Globally, President Masisi said the (International Monetary Fund) IMF economic outlook projected gradual recovery in the coming year with growth expected to strengthen at 5.2 per cent while sub-Saharan Africa was expected to grow at 3.1 per cent.

“This is expected to have a positive effect on the performance of the domestic economy,” he said.  

For this year, expected to be the worst economic crisis since the Great Depression of the 1930s, he said the IMF projected the global economy to contract by 4.4 per cent.

President Masisi said projections indicated that all regions of the world would experience negative growth.

“Economic activity in the emerging markets and developing economies is projected to contract by 3.3 per cent in 2020, while growth in sub-Saharan Africa is expected to register minus 3.0 per cent,” he said.

About inflation, the President said it fell from 2.2 per cent in September 2019 to 1.8 per cent in September 2020, remaining below the lower bound of Bank of Botswana’s medium-term objective range of three to six per cent.

However, he said the inflation rate might rise above the current forecasts if international commodity prices increased beyond current projections and in the event of upward price pressures occasioned by supply constraints due to travel restrictions and lockdowns.

Meanwhile the foreign exchange reserves took a knock by 8.7 per cent from P71.4 billion in December 2018 to P65.3 billion in December 2019 and declined further this year by 2.3 per cent to P63.7 billion in July.

President Masisi said the decrease was mainly due to foreign exchange outflows associated with government obligations and economy-wide import requirements.

He further said the level of reserves as at July was equivalent to 11.6 months of import cover.

Out of the total, about P13.7 billion or 22 per cent was attributed to the Government Investment Account, said President Masisi.

Meanwhile, in 2019, the domestic economy grew by 3 per cent against a projected growth of 4.2 per cent.

The President said the low growth rate was mainly attributed to a contraction in mining output as well as deceleration in non-mining GDP growth.

“Mining output fell by 3.9 per cent in 2019, mainly due to the weak performance of the diamond sub-sector, while non-mining GDP grew by 3.8 per cent in 2019. The slower growth in the non-mining GDP was primarily due to slower growth in the manufacturing, construction, transport and communications, as well as the services sectors,” he said.ENDS

Source : BOPA

Author : BOPA

Location : GABORONE

Event : SONA

Date : Nov 09 Mon,2020

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