In his February budget speech, Finance Minister and Vice President Ndaba Gaolathe, had forecast growth of 3.3 percent this year, based on the hope that diamonds would recover from their slump in the latter part of the year, whilst the non-diamond sector would continue its support of the economy.
The recovery is eagerly hoped for, as the economy shrank by three percent last year, owing to the prolonged downturn in diamond activities.
Since the budget, however, President Donald Trump of the United States has upended global growth forecasts with the announcement of his intention to levy import duties of up to 50% on all countries. Botswana was due to incur a 37% tariff on all goods to the US, whilst other key diamond partners such as India, China, Dubai, and Antwerp were similarly to be hit hard.
Whilst Trump has paused the reciprocal tariffs for 90 days, his administration has indicated that the measures are still in the works, an announcement that has dampened consumer sentiment in the US and reverberated through the global diamond industry, dimming hopes for a recovery.
BoB governor, Cornelius Dekop, said the anticipated recovery this year was in jeopardy.
“At the previous briefing, it was pointed out that our economy was in a recession in 2024 but was projected to improve,” he said at a briefing. “However, there is possibility that this recovery may be muted. “Indeed, the challenges faced now and those ahead require effective design and implementation of sound policies and achievement of high levels of productivity across all our initiatives and efforts to grow the economy.”
Responding to questions from BusinessWeek, Dekop declined to put a figure to the central bank’s expected growth forecast, deferring to the Finance ministry.
“The Finance ministry is responsible for making those estimates and if they revise it, they are the ones that will announce. “All we are saying, together with the credit ratings agencies, is that there needs to be a traction of the initiatives to grow the economy, rebuild fiscal buffers and enhance resilience. “The minister in his wisdom has to say whether he is sticking to the three percent forecast or not and we will see during the year if they announce that,” he said.
The central bank’s concerns about the traction of reforms in the economy are not new, as the bank has previously said key transformation initiatives required for sustainable growth were lagging behind the urgency seen in rising unemployment, stagnating growth and declining fiscal reserves.
Last week, the BoB said there was a need for all policy frameworks to be aligned towards building economic resilience.
“For example, fiscal policy in terms of enhanced resource mobilisation, rationalisation of expenditure and rebuilding fiscal and external buffers that enable continued policy discretion not influenced by any need for external support,” Dekop said.
The International Monetary Fund’s (IMF) World Economic Outlook released on Wednesday shaved the global growth forecast by half a percentage point to 2.8 percent for 2025 and by 0.3 percentage points for 2026.
The IMF made downward revisions in growth for nearly all countries, citing the turbulence caused by the global trade upheaval.
“The downgrades are broad-based across countries and reflect in large part the direct effects of the new trade measures and their indirect effects through trade linkage spillovers, heightened uncertainty, and deteriorating sentiment,” IMF researchers stated in their projections.
