Economic recession concerns BoB

The Governor of Bank of Botswana (BoB) Cornelius Dekop said the domestic economy is facing severe headwinds and is expected to grow by 3.3 percent in 2025. Dekop, while briefing the media on the decision of the bank’s Monetary Policy Committee (MPC) decision on Thursday, said the economy is in deep contraction, which is a great concern for BoB. 

He said as reported by Statistics Botswana, real gross domestic product (GDP) declined by 4.3 percent in the third quarter of 2024, compared to a growth of 1.1 percent in the corresponding quarter in 2023. 

Dekop said this marks the third consecutive decline in GDP, following contractions of 5.2 percent and 0.4 percent in the first and second quarters of 2024, respectively, indicating that the economy is in a recession. 

“The contraction in economic activity is mainly attributable to the decline in diamond mining output and revenues. This contraction is further compounded by the weaker performance in non-mining sectors,” he said. As a result, Dekop said export earnings declined, constraining government spending and dampening overall economic activity in the second half of 2024. 

According to the January 2025 International Monetary Fund World Economic Outlook Update, global output is estimated to have expanded by 3.2 percent in 2024 and is forecast to grow by 3.3 percent for both 2025 and 2026. 

Dekop noted that the 2025 Budget Speech indicate that the economy contracted by 3.1 percent in 2024, adding that the decline is mainly due to the downturn in the diamond industry, driven by weak global demand. 

“The 2025 Budget Speech also projects the domestic economy to recover but grow below its potential at 3.3 percent, premised on the recovery of the diamond industry in the latter part of the year,” he said. 

Given the current economic conditions and the outlook for both domestic and external economic activity, as well as the market liquidity condition, Dekop said the MPC decided to maintain the Monetary Policy Rate (MoPR) at 1.9 percent. 

He said the 7-day Bank of Botswana Certificates auctions, repos and reverse repos will be conducted at the MoPR of 1.9 percent. 

Moreover, the MPC observes that inflation could be higher than projected if international commodity prices were to increase above current forecasts, and supply as well as logistical constraints in the global value chains persist.