major macro economic indicators
|2020||2021||2022||2023 (e)||2024 (f)|
|GDP growth (%)||-8.5||11.8||6.4||3.7||4.2|
|Inflation (yearly average, %)||1.9||6.7||12.2||6.5||5.2|
|Budget balance (% GDP)*||-9.9||-2.4||-2.0||-2.7||-3.0|
|Current account balance (% GDP)||-10.6||-0.5||3.1||3.3||5.4|
|Public debt (% GDP)*||18.7||19.0||20.0||20.6||19.6|
(e): Estimate (f): Forecast *Fiscal year from 1st April - 31st March
- Abundant natural resources (notably diamonds, as well as copper, coal, silver and nickel)
- Low public and foreign debt
- Sovereign wealth fund, the Pula Fund, financed by diamond revenues
- Large foreign exchange reserves and substantial sovereign wealth fund
- The country's political stability and level of governance place it among the top countries in sub-Saharan Africa in business environment international rankings
- Member of the Southern African Customs Union (SACU)
- Dependence on the diamond sector which accounts for more than 90% of exports, a poor provider of jobs
- Remote location generates high transport costs
- Small domestic market not conducive to manufacturing (15% of GDP)
- Inadequate infrastructure (water and electricity production and distribution)
- Considerable inequality and high unemployment (particularly among young people), poverty maintained at a relatively high level
- Lack of skilled labour, small domestic market
Economic growth remains robust
The economy has benefited from a dazzling post-pandemic recovery and an improvement in the diamond terms of trade brought about by official and trade sanctions on Russian diamonds. In 2024, it will maintain a robust growth trajectory that is still largely driven by the mining sector (which generates between 20% and 25% of GDP). Diamond mining, which accounts for around 95% of the mining sector, and diamond exports are set to increase in response to slightly growing demand on back of a more buoyant global economy, particularly in the eurozone, its second-largest client. In addition, the new agreement reached in June 2023 between the Botswana government and De Beers as part of their 50/50 Debswana diamond mining joint venture – 98% of diamonds are mined locally – provides for a larger share of production to be allocated to Botswana (30%, rising to 50% by 2033, compared with 25% previously). This will increase local processing, cutting and polishing. Mining activity will also be supported by copper production. This will be boosted by the increased quantities extracted from the Motheo mine, operated by Sandfire Resources, which came on stream in May 2023. The tourism sector (15% of GDP before the pandemic) will continue to recover, underpinned by greater economic momentum in Western countries, which provide a significant proportion of visitors and stimulate service exports. Imports will be down, reflecting the stabilisation of food commodity prices and lower electricity purchases. The latter is the result of an increase in electricity production in the country (mainly based on solar photovoltaic energy, coal and coalbed methane), in the wake of the Integrated Resource Plan launched in December 2020, which aims in particular to make Botswana an electricity exporter by the end of 2027. In addition, the 12th National Development Plan adopted in March 2023, which will be supported by a budget of 64 billion pula (equivalent to almost USD 4 billion) spread over two fiscal years (2023-2024 and 2024-2025), will stimulate investment. Most of the budget is allocated to the Ministry of Lands and Water with the aim of implementing vast projects to rehabilitate and extend existing water networks. Lastly, inflation should return to the target set by the Central Bank (3-6%), thanks to the stabilisation of food commodity prices, as well as the likely maintenance of administered prices (water and electricity, in particular) at their current levels. Monetary policy will thus remain accommodating, with the key rate at 2.65% in mid-2023 (compared with 3.75% at its peak in 2021). This will support private consumption, which has accounted for between 40% and 45% of GDP in recent years.
Public and external accounts confirm their positions
After two years of large current account surpluses, this surplus is set to increase. The trade balance will benefit from higher mining and tourism exports, combined with lower electricity imports and, more generally, lower import costs, against a backdrop of stabilising international prices for energy and agricultural products. Foreign exchange reserves, already at a comfortable level, will be further consolidated (in excess of 6 months' imports). This will facilitate the currency's sliding exchange rate being kept against a basket of currencies dominated by the rand.
The public deficit will increase further. It will mainly reflect the accumulation of expenditure, covering measures to mitigate the inflationary impact of the war in Ukraine (notably via administered prices), economic stimulus measures (in particular under the Economic Recovery and Transformation Plan) and investment for economic diversification, notably through the National Development Plan. Revenues from the Southern African Customs Union (SACU) are expected to increase slightly, due in particular to greater economic growth in South Africa, but will nonetheless remain limited. However, the rise in the deficit will be contained by greater mining revenues and the efforts announced by the government to control the wage bill. Public accounts could also benefit from more efficient revenue collection, which is one of the chief objectives of the National Development Plan for the next two years.
Public debt, the weight of which is set to fall thanks to the rise in GDP and of which around 35% is domestic, will therefore remain well below the average for emerging and African countries.
A stable political situation, despite the forthcoming elections in 2024
The Botswana Democratic Party (BDP), which has been in power since the country's independence in 1966 and which won 67% of the vote and 38 of the 57 seats in the October 2019 general election, will again seek power in 2024. The Coalition for Democratic Change (UDC), the main centre-left opposition coalition, currently holds 18 of the 65 seats in Parliament. Discontent expressed by part of the population with regard to high unemployment and persistent inequalities amid a favourable economic context, coupled with internal disagreements within the BDP that have been exacerbated by the conflict between Ian Khama, its former president (exiled in South Africa since 2021 and the target of an arrest warrant issued by Botswana in December 2022 for illegal possession of firearms), and the current president Masisi, who led the former in founding his own party) and a declining score in previous elections held in 2014 and 2019 could favour the opposition. However, the UDC itself is experiencing turbulence within its own ranks following the withdrawal of the Botswana Congress Party (BCP) from the coalition in July 2023. This has weakened its unity, which is a crucial condition if it is to compete with the significant political capital accumulated by the BDP over more than five decades. Despite the climate of uncertainty, the political situation will remain stable until the elections given the BDP's comfortable majority in the Assembly. The smooth running of the elections will be ensured by democratic institutions that remain solid.
Relations with South Africa will be further strengthened, notably through the deployment of cross-border infrastructure projects. Namibia and Botswana are continuing their rapprochement and both lifted the restriction on the free movement of people in February 2023. Relations will also be strengthened with Angola, which is also keen to develop its diamond sector, and with which Botswana signed agreements in July 2023 on closer cooperation in the fields of energy and air services. Its status as a stable African democracy will enable the country to maintain its close links with its traditional trading partners (Europe and North America). Its strategic position vis-à-vis these partners will be enhanced by Europe's quest for energy security to which Botswana can partly respond.
Last updated: September 2023