Lesotho is poised for a decade of stable and moderate real GDP growth, based on its expanding clothing and textiles sector as well as a burgeoning construction industry and increased telecommu- nications and financial service activity. The country s high levels of poverty and HIV/AIDS prevalence will remain as obstacles to stronger economic development, as will Lesotho s reliance on South Africa to support export demand. ...We forecast fixed investment and exports to grow by -.- and -.- , respectively, in ----. This will be driven by the second phase of the Lesotho Highlands Water Project as well as growing clothing exports to the US. Lesotho s fiscal balance will move into deficit in ---- as a result of a high public sector wage bill outweighing revenue growth. We fore- cast the fiscal balance will deteriorate into a deficit of -.- of GDP in ---- compared to an average surplus of -.- in the preceding four years. ...Lesotho s political and economic stability will remain strongly influ- enced by South Africa, which completely surrounds the mountainous nation, over the coming decade. Lesotho is reliant on South African demand for its exports, as well as political assistance, as evidenced by South Africa s deputy president s involvement as the Southern
...--.- of all remittance income is spent on basic needs such as clothing, food and groceries. Expenditure is characterised as recurrent and allocation to savings is low. ...Furthermore, the Ministry of Finance s FY----/-- budget indicates --.- growth in employee compensation compared to FY----/--. Fixed Investment: Fixed investment in Lesotho will grow ro- bustly over our ---year forecast period as the second phase of the Lesotho Highlands Water Project (LHWP) is implemented. We forecast fixed investment to rise from --.- in ---- to --.- of GDP in ---- as we expect LHWP phase - to begin supplying South Africa with water in ----. ...We expect government fixed investment to remain subdued over the next -- years as the government directs spending towards recurrent expenditures. The high government wage bill will lead to insufficient funds being available for investment into capital - Business Monitor International Ltd www.bmiresearch.com
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