Economic Outlook
The services sector plays a significant role in the growth and development of Botswana economy, contributing 69.1% of GDP followed by industry and agriculture, contributing 29.2% and 1.7 % of GDP respectively. Botswana is also dependent on trade for its economic growth, with trade in goods and services contributing about 97% to GDP in 2017.
Much of Botswana’s export earnings, about 85%, are from the diamond export, followed by tourism. The country continues to recover from a setback experienced in 2015 due to a weak demand for diamond exports, severe drought and shortages in water and electricity supply, recording a growth rate of 4.3% in 2016 and 4.5% in 2017, driven mainly by non-mining activities such as water and electricity, trade, hotel tourism and transport, communication and construction. Real GDP growth is projected to rise to 5% in 2018. Plans are in place to continue with the expansion of construction linked to the country’s stimulus programme as well as plans to upgrade electricity and infrastructure.
While Botswana enjoys a budget surplus, it is expected to incur a modest budget deficit in 2018 due to lower mining revenue, reduced revenue from the Southern African Customs Union (SACU) and higher spending intended at stimulating the economy. In 2017, public debt fell to 22% of GDP and has been maintained well below the statutory ceiling of 40%. Botswana enjoyed a current account surplus of 12% of GDP in 2017, and its reserve coverage was estimated at 17 months of imports at the end of 2016. Inflation was expected at 2.8% in 2016 due to low domestic demand and a modest increase in international prices.
Potential Opportunities
With a population of 2.18million in 2017 that is expected to grow to 2.2 million in 2019, a GDP of US$2.721 billion in 2017, which is expected to increase to about US$3 billion in 2019 and a GDP per capita income of US$1,414 in 2017, projected to rise to US$1,574 in 2019, Botswana provides a relatively small domestic market. However, despite its small domestic market, the country holds opportunities for export diversification to neighbouring South Africa, SADC, SACU, COMESA, Africa, UK and the US market under Africa Growth Opportunity Act (AGOA).
The country’s volume of imports of goods and services is expected to increase from -3.25% in 2017 to 2.35% in 2019 and the size of exports of goods and services is expected to grow from -19.53% in 2017 to about 4.01% in 2018, indicating growth in trade.
There is potential for investment in construction, tourism, hotel and catering, and infrastructure development.