Country Report Botswana July 2009

Outlook for 2009-10

• The ruling Botswana Democratic Party (BDP) is expected to win the general election in October 2009, despite its internal conflicts, and the president, Ian Khama, will remain in power over the forecast period.
• The government will continue to pursue largely prudent policies in 2009-10, although countercyclical fiscal policy and falling revenue from diamond sales will increase the budget deficit to 11.4% of GDP in fiscal year 2009/10.
• Consumer price inflation is forecast to average 8% in 2009 and 5.8% in 2010, as the impact of rising oil and food prices in 2008 dissipates, paving the way for the Bank of Botswana (the central bank) to cut interest rates further.
• The Economist Intelligence Unit forecasts that real GDP will contract by 14% in 2009 (January-December), mainly owing to a sharp fall in diamond production, before growth returns at a modest rate of 3.2% in 2010.
• The current account is forecast to record a deficit of 9.7% of GDP in 2009, as exports are hit by weak global demand for diamonds. The deficit will narrow to 7.7% of GDP in 2010, as diamond exports begin to recover.

Monthly review

• Factional rivalries within the BDP have been stoked by the increasingly bitter contest between Daniel Kwelagobe and Tebelelo Seretse for the party chair and by Mr? Khama's expression of support for Mrs? Seretse.
• The Botswana National Front (BNF) has expelled another deputy on grounds of indiscipline, leaving it with only seven legislators remaining in office.
• According to the government, additional borrowing of P32bn (US$4.6bn) will be needed to finance spending under the tenth National Development Plan.
• The Bank of Botswana cut the bank rate to 11.5% in June, bringing the cumulative reduction in the bank rate to 4 percentage points since December.
• Preliminary estimates indicate that GDP fell by 20% year on year in the first quarter of 2009; a contraction of this magnitude was unsurprising, as diamond production was suspended for the entire period.
• Botswana Power Corporation (BPC) appears to have secured US$825m of funding for the expansion of Morupule power station; Mozambique is prepared to double electricity supplies to Botswana.
• Development of a pan-African commodities exchange in Botswana will begin in late 2009; the exchange is intended to become part of a network in over 50 countries trading in commodities, currencies and bonds.
• Botswana, Lesotho and Swaziland have signed an interim economic partnership agreement (EPA) with the EU, despite South African objections.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;37;70;53;49;82;2834;80;20;22;39;48
NAICS Code: 52;336;72;44;22;61;3254;62;311;313;517