Botswana

This report does not constitute a rating action. Overview Institutional and economic profile Flexibility and performance profile The global diamond industry has faced significant downturn over the past several months, due to a lack of Chinese and other global demand and excessive inventory weighing on Botswana's GDP growth. The diamond sector underpins Botswana's economic, external, and fiscal performance. -- We revised our real GDP growth projection down to 1% in 2024. -- Following weaker diamond exports, we expect Botswana to run a current account deficit of 1.8% in 2024 before a rebound in diamond exports delivers surpluses averaging 1.9% of GDP in 2025-2027. -- An expected rebound in diamond demand alongside non-diamond growth will support headline GDP growth at 3.6%

...We forecast real GDP growth to decelerate to 1% in 2024. This will largely be due to weak demand for diamonds amid global macroeconomic uncertainty and especially ongoing weakness in China, alongside diamond cutters having excess inventory of rough diamonds. We anticipate that the government will aim to reduce fiscal deficits in the medium term and keep public debt low. We expect an increase in the general government deficit to 4.1% of GDP for fiscal 2024/25 from 3.2% of GDP a year earlier on weaker mineral revenue and spending pressures ahead of the October 2024 elections. Given pressures in the diamond sector, and consequent reduced revenues, the government recently decided to cut back on capital expenditure to contain the 2024/25 deficit. We forecast that the government will also work toward reducing the deficit from fiscal year 2025/26 onward. We project that Botswana will maintain its strong net external asset (stock) position amid projected current account surpluses over 2025-2027....

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