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Botswana Country Risk Report Q3 2015


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Botswana Country Risk Report Q3 2015

Core Views

Economic growth in Botswana will remain relatively healthy over thecoming years, averaging around 4.5% annually. Even so, growthwill continue to be dominated by the mining sector, as economicdiversification efforts continue to bear little fruit.

Lower fuel and food prices and continued slack within the economywill allow the Bank of Botswana to keep monetary policy accommodativethroughout the remainder of 2015.

In the continued absence of meaningful economic diversification,the mining sectors set to remain a key engine of growth. Whilenickel, copper and particularly coal will become more prominent inthe country’s export base, as well as driving investment, diamondswill retain their primacy.

We expect a return to the political status quo in Botswana in 2015and 2016, following escalating tensions in the run up to the October2014 general elections.


Executive Summary
Core Views
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Cracks In BDP Will Hurt Popularity
Botswana will remain broadly stable over the next 18 months, following the re-election of the long ruling Botswana Democratic Party
(BDP) in late 2014. However, ongoing social issues, cracks within the BDP party, and a presidential power transfer in 2018 will enable
the opposition coalition - the Umbrella for Democratic Change (UDC) - to mount a credible threat to BDP's power in the next general
election in 2019.
Long-Term Political Outlook
An Incomplete Miracle
Botswana's status as one of the most stable and politically progressive countries in Sub-Saharan Africa (SSA) is likely to endure for
the foreseeable future. While we see the potential for political or social upheaval as minimal, over the next decade the government
will come under mounting pressure to address the country's extreme inequality as well as facing the prospect of a reinvigorated
opposition.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Activity
Growth Solid, But Still Mining-Driven
Economic growth in Botswana will remain relatively healthy over the coming years, averaging around 4.5% annually. Even so, growth
will continue to be dominated by the mining sector as economic diversification efforts continue to bear little fruit.
Table: Economic Acti vit y
Monetary Policy
Monetary Conditions To Remain Loose, But With Diminishing Returns
Subdued temperate inflation and persistent slack within the economy will allow the Bank of Botswana to keep monetary policy
accommodative through the remainder of 2015.
Table: Moneta ry Polic y
Banking sector
Robust Banking Expansion Ahead
Botswana's well developed banking sector will continue to expand in 2015, driven largely by private consumption. Declining liquidity and
increasing unsecured loans could challenge future stability.
Regional Sovereign Debt
Currency And Interest Rate Risk Raising Chances Of SSA Credit Event
Sovereign debt profiles in Sub-Saharan Africa will suffer over the coming years. Debt levels are mounting as a percentage of GDP and
the inherent dangers of this will be exacerbated by depreciating currencies and a rise in non-concessional borrowing. A failure to widen
the tax base to cover this will heighten the risk of a credit event.
Chapter 3: 10-Year Forecast
The Botswanan Economy To 2024
Long-Term Prospects Still Positive
Despite ongoing efforts by the government to diversify Botswana's economy away from a heavy reliance on diamonds, we believe the
precious stone will remain the mainstay of the Southern African country's economy over the foreseeable future.
Table: Long-Term Mac roec onomic Forecasts
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
Table: Ope rati onal Ris k
Legal Environment
Table: Sub -Saha ran Africa - Lega l Ris k
Costs Of Labour
Table: Sub -Saha ran Africa - Lab our Cost Ris k
Table: Average Annua l Wage By Sect or
Chapter 5: BMI Global Macro Outlook
Global Outlook
Softening Growth Picture
Table: Globa l Assu mpti ons
Table: Developed States , Rea l GDP Growt H, %
Table: BMI VERSUS BLOOM BERG CON SENSUS REAL GDP GRO WTH FOR ECASTS, %
Table: Emergi ng Ma rkets , Rea l GDP Growth , %

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