Low mining output harm GDP

Bank of Botswana (BoB) Governor Moses Pelaelo has said the Gross Domestic Product (GDP) recorded a significant decline in 2019  growing by 3.9 percent in the twelve months to June 2019,compared to a faster expansion of 4.9 percent in the corresponding period.

Briefing the media on the Monetary Police Committee (MPC) meeting on Thursday, Pelaelo said the lower increase in GDP is mainly attributable to decline in growth of the local mining sector.

The sombre mining statistics reveal that the mining output grew by 1.4 percent in the year to June 2019, compared to 5.6 percent in the corresponding period in 2018.

According to the Governor, the lower increase is, in the main, due to significant reduction in growth of diamond output from11.8 percent to a mere one percent in the period under review.

“The fall in diamond output is mainly due to the decline in diamond production by Orapa mine, following a planned plant shutdown in April 2019.Non-mining GDP grew by 4.2 percent in the 12 month period to June 2019, equated to 4.8 percent in prior period end June 2018,”he added.

The lower expansion in non-mining, he said, was largely attributable to a slower growth of the trade, hotels and restaurants sector, reflecting weak perfomance across diamond industries.

Statistics Botswana data show that overall mining production declined by 8.7 percent in second quarter of 2019, with diamonds accounting for 8.1 percent of the fall.

The quarter-on-quarter analysis showed a decrease of 4.1 percent from the index of massive 89.6 percent during Q1 of 2019 to 85.9 percent during the Q2 of this year.

The bank has decided to maintain the bank rate at 4.75 percent; having been reduced to that level in the last MPC meeting.

Pelaelo said inflation increased from 2.9 percent in September 2019, the lower bound of the bank’s objective range of 3- 6 percent.

However, he said inflation is expected to breach the lower bound of the objective range in the near term but revert to that in Q2 of year 2020.

“Subdued domestic demand pressures and the modest increase in foreign prices contribute to the positive inflation outlook in the medium term. This good outlook is subject to upside risks emanating from the potential rise in administered prices and government levies and taxes, beyond the current forecasts,’’ Pelaelo declared.

The Director of Research and Stability at BOB, Dr Tshokologo Alex Kganetsano, is confident of a turnaround, anticipating that a lot of positivity can still happen before the year end in the mining sector.

He said retaining the bank rate at 4.75% percent will boost more borrowing confidence from the clients, adding that global growth is crucial for Botswana’s economy, as it depends a lot on consumer confidence in developed countries which have the ability to purchase diamonds in bulk.