The IMF’s World Economic Outlook (WEO), released on 9 October 2012, projects that Botswana’s real GDP will grow by 3.8 per cent this year; this is an increase from April’s WEO, which predicted 3.3 per cent growth. The October WEO expects inflation in the range of 7.5 per cent and the 2012 current account balance to be a positive 3.9 per cent of GDP, reflecting strong exports of goods and services.
However, the WEO also reported several threats to Botswana’s continued economic growth. Through trade, the economy is strongly linked to South Africa, which provides over 70 per cent of the country’s goods. This is problematic for Botswana due to South Africa’s close ties with the crisis-ridden Euro area.
Furthermore, the IMF reported that the risk of higher food prices to net food importers like Botswana would erode savings the national and local levels. Finally, the IMF warned that a prolonged slowdown in China – a major market for Botswana’s copper, nickel and coal – could adversely affect GDP and employment figures.
To avoid unnecessary damage to the domestic economy the IMF recommends that Botswana continue strengthening policy buffers and preparing contingency plans to deal with any economic downturn.
On a positive note the Pula Fund, one of the country’s key sources of protection from external market shocks, has made strong gains following its precipitous decline during the global recession, recovering from P43.5 billion at the end of 2009 to P55.6 billion in July 2012.