Botswana's economic growth is forecast to slow to 3.8% this year from 5.8% in 2022 "due to the projected decline in diamond production and the weaker global environment," says the International Monetary Fund.
Growth is forecast to gradually rebound in 2024 and 2025 to over 4% as a result of higher prices and quantities of diamonds produced, as per the IMF's statement published on Thursday.
Furthermore, inflation is forecast to return to and stay within the central bank's target range, the IMF added.
After the Executive Board concluded the 2023 Article IV consultation with Botswana, the IMF stated that the country's authorities are planning fiscal growth in FY2023, followed by two years of considerable fiscal adjustment in order to reach a fiscal surplus by FY2025.
"Together with a gradual recovery in diamond production and prices, FX reserves are projected to stabilise at 5 ½ months of imports over the medium term. The outlook remains heavily dependent on demand for diamonds and the global economic cycle," according to the IMF statement.
Furthermore, the IMF said Botswana's economy grew close to 12% in 2021. "The ongoing recovery from the pandemic primarily reflects elevated mining production. Inflation has declined sharply since August of 2022. After declining in 2022, FX reserves have stabilised and remained at adequate levels at the end of 2022. The unemployment rate remains elevated at 25%," the statement added.
"…As outlined in the Financial System Stability Assessment (FSSA), the financial sector appears broadly sound, stable, and resilient. However, it is essential to monitor contagion risk from banks to non-bank financial institutions due to the concentration of large non-bank deposits. Banking supervision should be further enhanced on the basis of a risk-based framework and data gaps closed for requisite calibration of macroprudential tools."
The IMF statement went on to say: "The crisis management and safety net framework has been strengthened significantly with the introduction of a deposit insurance scheme. The Financial Stability Council should play an important role in developing and coordinating a comprehensive framework for crisis management and resolution."
In addition, within the Botswana country report published by the IMF on Thursday, the total number of assets by state-owned enterprises (SOE) reached 32% of GDP in 2021.
"Financial SOEs account for 14% of total assets, comprised of the Botswana Development Corporation (BDC), National Development Bank (NDB), Botswana Stock Exchange (BSE), and Botswana Savings Bank (BSB). The largest non-financial SOEs are Botswana Power Corporation (BPC) and Water Utilities Corporation," said the IMF country report.