Botswana Economic Outlook
In Q2, annual GDP growth dipped to 3.4% after a revised 5.5% expansion in Q1. The mining, public administration, construction, accommodation and food services and wholesale and retail sectors were the primary drivers of growth. Moving into Q3, the economy likely fared well. Q3 inflation was around a third of the Q2 level, likely bolstering household consumption. Moreover, robust credit growth in July and August likely supported domestic demand. However, a drop in the prices of diamonds—the nation’s key export—probably restrained the external sector. In other news, on 27 October, Moody’s affirmed Botswana’s credit rating at ‘A3’, maintaining a stable outlook due to its low public debt levels and robust institutions. In the short term, this decision is likely to boost investor confidence.
Inflation rose to 3.2% in September from 1.2% in August. Inflation should average below this year’s level in 2024 due to reduced commodity prices. Disruption to agricultural output due to El Niño is an upside risk, while price swings in commodities and unforeseen adjustments in government-set prices are risks to the outlook in both directions.