Absa economists have predicted a long-term economic recovery road for Botswana following technical recession due to the effects of the COVID-19 pandemic.
Briefing journalists at a two-day Data Journalism course organized by the bank in conjunction with Rhodes University recently, Mr. Jeff Gable, Absa Group chief economist said Botswana’s economy had been affected by the slump in commodity prices, especially diamonds, an illustration that the country had not yet achieved economic diversification.
The latest information from Statistics Botswana showed that the country’s economy declined by 24 percent during the second quarter of this year, mainly due to diamond trading that went down by 67 percent.
Mr Gable said while COVID-19 fatalities were low, the pandemic can had a major impact on African economies, including Botswana.
Again, he indicated that African countries did not have fiscal space to introduce stimulus packages hence cannot have long periods of lockdowns as experienced in developed countries. He said Botswana’s economic recovery depended on a global economy that needed to grow again and that might take a long time.
On one hand, the African Development Bank (AfDB) cut the continental growth by 7.2 percentage points which Mr Gable said was conservative as they forecast a decline of 10 per cent. Other than the diamond sector, he said tourism had come to a grinding halt and global tourists were not likely to arrive and therefore there had to be a way to attract regional tourists during the festive season.
Mr Gable said tourism was not just an important foreign exchange earner for many economies, but also provided significant employment.
“It is not about the borders or airspace to be opened but also the willingness of tourists to travel long distances for a holiday,” he said.
He also indicated that remittances played a meaningful role in the continent because they were larger than Foreign Direct Investment (FDI).
He added that remittances into Africa from Africans living within the continent were also significant.
“Countries such as Morocco and Egypt get more than US$10 billion from remittances every year. Seven countries amongst them Zimbabwe where remittances are responsible for more than 10 per cent of their GDP, are likely to feel the blow,” he said. He further said COVID-19 risked eliminating many of the recent gains in poverty alleviation.
“As for Botswana, although its GDP is bigger and hence remittances play a little role, domestically the country can also feel the COVID-19 effects when Batswana living in cities do not have money to send to their rural folks,” he said.
Again, he said COVID-19 had also brought challenges to sovereign debt, adding since 2015, the number of countries in debt distress or high risk had jumped to 20.
For his part, Absa Group Africa strategist, corporate and investment banking, Mr. Ridle Markus, said Botswana faced significant challenges and uncertainties.
Mr Markus said Botswana had failed to fully diversify its economy hence when luxury commodities went down, the local economy was bound to be affected as it happened during the 2008 economic meltdown.
“The economy has been impacted by climate change, drought circles are now closer and they cause damage,” he said.
He said agriculture was the only sector that did well during the first half of this year but it also came from a precisely low base following a contraction in 2019.
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