Lesotho

Economic Outlook

The services sector plays a significant role in the growth and development of the Lesotho economy, contributing 60.1% of GDP followed by industry and agriculture, contributing 34.6% and 5.3 % of GDP respectively. Lesotho is also dependent on trade for its economic growth with trade in goods and services contributing about 125% of GDP in 2016. In 2017, Lesotho’s economy grew by 4.6 % owing mainly to better performance in the primary sector. However, growth for 2018 and 2019 is expected to dip slightly to 4.3% and 4% respectively due to a drop in the growth of mining. The country has also experienced slow growth in textiles and clothing for the United States of America market.

Lesotho enjoys a budget surplus which is projected to be 0.3% and 0.2% in 2018 and 2019 respectively. The country has experienced a drop in public debt to 46.35 in 2017 and is expected to drop further to 45.5% in 2018 mainly due to lowering external debt estimated at 83% of the total public debt. The crowding-in effect of the government’s fiscal policy is expected to lead to growth in private-sector credit. Inflation was estimated to be 5.3% in 2017 in line with falls in food prices due to improved domestic production. The country has an estimated official international reserve of 5 months of imports by 2019.

Potential Opportunities

With a population of 1.93 million in 2017 that is expected to grow to 1.94 million in 2019, a GDP of US$2.72 billion in 2017, which is expected to increase to about US$3.05 billion in 2019 and a GDP per capita income of US$1,414 in 2017, projected to rise to US$1,574 in 2019, Lesotho provides a growing market for exporters and investors. However, despite its small local market, and expected decrease in Lesotho’s volume of imports of goods and services from 4.8% in 2017 to 4.7% in 2019, the country holds opportunities for export diversification to neighbouring South Africa, SADC, SACU, COMESA, Africa, the UK and the US market under Africa Growth Opportunity Act (AGOA).

The amount of Lesotho’s exports of goods and services is expected to grow from 5.79% in 2017 up to about 5.93% in 2019, indicating export expansion. There is potential for investment in mining as the country seeks to achieve full production capacity in the sector.

There is also a potential for investment activities in the construction sector as the country aims to boost construction activities. Infrastructure development and telecommunication services also offer a potential for business.

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