Botswana Economic Outlook
Led by the water and electricity, diamond, and mining sectors, GDP experienced a robust 5.9% annual expansion in Q4 2022. As a result, the economy grew by 5.8% in 2022, approximately half of 2021’s growth rate. Compared to 2021, government spending growth decelerated, while fixed capital formation and exports contracted. In contrast, private consumption growth accelerated. In Q1, economic activity likely lost steam. Diamond exports likely decreased due to weak demand from trading partners. Furthermore, unlike in previous years, the trade balance for January–February registered a deficit, boding poorly for economic activity. In contrast, inflation in Q1 averaged lower than in Q4. Additionally, the Bank of Botswana’s decision to hold rates on April 28 likely supported economic activity.
Inflation came in at 8.0% in April (March: 9.9%), still above the Central Bank’s 3.0–6.0% target range. The deceleration reflected a moderation in transport and housing and utilities prices. Inflation is expected to average lower in 2023 compared to 2022 but remain above the target. Risks include commodity price swings, unexpected administrative price changes and fiscal developments.