Botswana's economic recovery will stumble in 2017, as base effects following a recession in 2015 are no longer enough to offset persistent headwinds in the mining sector. That being said, the Southern African economy remains an attractive destination for foreign capital, with foreign inflows into coal mining likely to offer a significant long-term boost to growth.
Weak revenue growth and a commitment to capital spending will see Botswana's fiscal deficits continue over our short-term outlook to 2019. That being said, a relatively small debt burden means any shortfall will remain largely manageable.
Underperforming growth in Botswana's mining sector and the poor SACU receipts will see the country's current account surplus narrow over our short-term outlook, as import growth remains robust in the face of stagnant foreign revenues. However, this contraction in the country's trade balance will be short-lived, and represents no real threat to the wider economic outlook.
Inflation will remain close to the bottom of Botswana's inflation target band over the coming months, as low fuel and food prices temper the country's consumer basket. This will see the central bank persevere with loose monetary policy through to 2019.
Botswana will remain one of the most politically stable countries in Southern Africa over our long-term forecast period to 2026. Although risks exist in the form of climate change and high levels of inequality, these are unlikely to pose a substantial threat to the country's political stability.
Major Forecast Changes
We have revised down our expectations for real GDP growth on the back of poor Q1 data and a weaker outlook for the country's mining sector.