Botswana predicts return to growth in 2010/11

Tuesday, 09 February 2010

Botswana's economy should return to growth in the financial year to June 2011, lifted by a gradual recovery in global diamond sales, Finance Minister Kenneth Matambo said on Monday.

He said in a budget speech to parliament the southern African country's economy likely recorded zero growth in the current financial year after declining 4,6% in the four quarters to September last year.

The economy should expand by about 5% in 2010/11.

"We are projecting a gradual recovery of the world diamond market, the dollar value of world diamond sales is expected to gradually return to the level achieved in the financial year 2007/08 by 2012/13," Matambo said.

"In the meantime the rest of the economy will continue with modest real growth in part because we have avoided a sharp reduction of government spending."

The world's biggest diamond producer has been hard hit by a slump in international demand, hitting government revenue and cutting jobs after some mines were forced to temporarily close.

This has caused the government to cut back on development plans for the next six years.

While diamond sales have picked up, Matambo said mining output would likely remain below potential for the next two years.

"The partial recovery of the minerals sector in the second and third quarters of 2009 reflect developments in the world economy and the consequent positive impact of these on the mining sector, particularly the diamond sector," he said.

"However, owing to uncertainties in the global economic prospects it is expected that output for this industry will remain below the long term trend potential for another year or two."

Reuters