Country Report Botswana July 2008

Outlook for 2008-09

• The ruling Botswana Democratic Party (BDP), under the new president, Ian Khama, will remain in power over the forecast period, and is expected to win the 2009 legislative election, continuing its decades-long period in office.
• The government will continue to pursue largely prudent policies in 2008-09 that support macroeconomic stability and financial discipline. No major change in policy direction is expected under Mr Khama.
• The Economist Intelligence Unit forecasts real GDP growth of 4.1% in national accounts year 2008/09 (July-June), rising marginally to 4.4% in 2009/10, driven largely by infrastructure spending and increasing mining activity.
• Rising international food and oil prices are expected to push Botswana's inflation up to an average of 11.5% in 2008, but upward pressures are forecast to ease in 2009, allowing average inflation to fall to 10.5%.
• The current-account surplus is forecast to narrow from 13.1 % of GDP in 2008 to 11.2% of GDP in 2009, in line with falling receipts from the Southern African Customs Union and a narrowing trade surplus.

Monthly review

• Tshekedi Khama, younger brother of the president, has won an unsurprisingly large victory in the by-election for Serowe North-West, the traditional capital of the Bamangwato tribe, of which Ian Khama is the paramount chief.
• Rivalries within the BDP have intensified in the run-up to the primary elections to select candidates for the 2009 election; but these are largely at a constituency level and unity at a national level has been unaffected.
• The local press has remained wary of the new president, raising concerns that he may be intolerant of dissent and looking to repress the media.
• Botswana has continued to lead Africa in protesting against the outcome of the election in Zimbabwe, and has called for the suspension of Zimbabwe from regional organisations.
• Protest action by nurses has been averted after the government agreed to allow nurses to be appointed to grades attracting higher salaries.
• The Bank of Botswana has increased its benchmark bank rate from 15% to 15.5%, following the continued rise in inflation to 12.1% year-on-year in May.
• According to recent reports, high levels of economic growth and of business confidence have continued despite rising inflation, higher interest rates, a slowdown in global economic growth, and regional supply-side constraints.
• Two large construction projects have stalled due to rising costs—the proposed Mmamabula coal mine and power station, and a new nickel refinery.