Country Report Botswana June 2009

Outlook for 2009-10

• The ruling Botswana Democratic Party (BDP) is expected to win the general election in October 2009 by a comfortable margin, 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 push up the budget deficit to 12% in fiscal year 2009/10 (April-March).
• 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 10% of GDP in 2009, as exports are hit by weak global demand for diamonds. The deficit will narrow to 8% of GDP in 2010 as diamond exports begin to recover.

Monthly review

• Voter registration, in preparation for the October election, was opened for the final time during a three-week period starting in mid-May; the authorities were confident of exceeding their target of 650,000 registered voters.
• The shooting of an apparently unarmed criminal by security forces and the government's poor handling of the situation could undermine the BDP's prospects of capturing opposition-held constituencies in Gaborone.
• The African Development Bank has approved a loan of US$1.5bn (P10.5bn) to Botswana to support government finances in 2009/10 and help to make up for a heavy fall in mineral revenue.
• Year-on-year consumer price inflation, which has been on a downward trend since November last year, fell to 8.4% in May. Rising world oil prices may slow the fall of inflation over the coming months.
• Namibia and Botswana have signed an agreement to build a railway line linking mining operations in Botswana with the Namibian port of Walvis Bay.
• The trade deficit fell to P3.4bn in the first quarter of 2009, compared with P4.8bn in the fourth quarter of 2008. Deficits of this size are unprecedented for Botswana and are due to the slump in world demand for diamonds.
• South Africa's Zambia Copper Investments appears finally to have won control of African Copper, owner of the Mowana mine near Francistown.

This report covers the following industry codes:
SIC Code: 20;47;10
NAICS Code: 311;48;212