Botswana flag Botswana: Economic and Political Overview

The economic context of Botswana

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Botswana has one of the strongest economies in Africa and, even though the country was affected adversely by the pandemic, Botswana's economy showed a significant recovery in 2021. According to the IMF, GDP grew by an estimated 9.2%, mainly driven by a rebound in diamond exports and an increase in domestic demand. In the coming years, the country's economy should continue to grow, albeit at a slower pace. According to IMF forecasts, GDP growth is expected to reach 4.7% in 2022 and 4.4% in 2023. Investment in the mining sector and the rebound of the prices of hard commodities (diamond, copper, and nickel) should contribute to this performance.

Botswana has always maintained a conservative fiscal policy and low levels of foreign debt and, although general government debt increased to an estimated 22.8% in 2022 following a large fiscal response to the COVID-19 pandemic, Botswana's debt is still substantially lower than its neighbours. In 2022, the debt-to-GDP ratio is expected to widen to 27.2% and then decrease to 26.7% in 2023, with the phase-out of pandemic measures. The overall deficit should decreased to an estimated 4% in 2021, and continue a downward trend in 2022, reaching 1.9%, before increasing to a surplus of 2.4% in 2023, mainly due to the recovery of diamond revenue and an increase in tourism. In 2021, inflation remained withing the central bank’s 3 – 6% target range, at an estimated 5.8%. However, inflation should decrease in the coming years, reaching 5% and 4.4% in 2022 and 2023, respectively. To fight the effect of the pandemic on its economy, the government of Botswana continued implementing a series of fiscal measures in 2021. Although the country's “Economic Recovery and Transformation” plan created fiscal pressures on the short run, Botswana's recovery packages have been effective in boosting economic activity, which has been gradually recovering. The fiscal consolidation policy the government is implementing should contribute to reducing the deficit and rebuild buffers in the medium term. Despite these positive outlooks, the growth level will remain too low to achieve Botswana’s development objectives and create enough jobs to absorb the new entrants. The government’s priority is to diversify the economy, making it less dependent on a volatile mining sector, and rely more on agriculture, services, and manufacturing. Botswana is working to expand its services industry by creating 'hubs' in the health, education, innovation, financial services, and tourism sectors, which it hopes will also strengthen its regional integration. Public spending will continue to advance at a more rapid pace, prioritising areas identified in the National Development Plan 11 (NDP11) that focuses on three key objectives: tackling poverty, ensuring inclusive growth, and job creation.

Botswana is regularly ranked first among African countries regarding governance and transparency. Its primary assets are its robust regulatory framework and facilitated procedures for property registration. However, despite its relative prosperity, Botswana still has one of the highest levels of inequality in the world and suffers a high unemployment rate and a lack of skilled labour. In 2021, the unemployment rate in the country was an estimated 24%, and it was especially high among young people. In September 2021, the country approved the The National Employment Policy for Botswana, a plan which aims to provide a comprehensive response to the challenge of unemployment facing the country.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 16.5915.06e17.6119.0020.61
GDP (Constant Prices, Annual % Change) 3.0-8.59.24.74.4
GDP per Capita (USD) 7,219e6,4207,3507,7718,257
General Government Balance (in % of GDP) 0.00.00.00.00.0
General Government Gross Debt (in % of GDP) 16.319.5e22.827.226.7
Inflation Rate (%) 2.71.9e5.85.04.4
Current Account (billions USD) -1.40-1.59e-0.71-0.370.50
Current Account (in % of GDP) -8.4-10.6-4.0-1.92.4

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Botswana is the world's second largest diamond producer and it possesses one of the largest coal reserves in Africa (an estimated 212 billion tonnes). Uranium, copper and shale gas are also abundant in the country. Agriculture contributes to only 2.1% of GDP (World Bank, 2020) and employs 19.9% of the population. However, it is an important source of income for many Botswanans who live in rural areas. Cattle raising dominates the sector and contributes to 80% to the agricultural GDP. Cattle population nearly equals human population, therefore most livestock production is export-oriented (towards the European Union and other destinations). As desert and poor soils cover more than 70% of the country, arable land is very scarce. Crop production is not too dynamic, mainly due to traditional farming methods, erratic rainfall, recurrent droughts and erosion. The crop sub-sector is dominated by the production of cereals, with sorghum accounting for 72% of national cereal production, followed by maize (17%) and millet (6%). In 2021, the agricultural sector greatly benefited from an expansion in the country's planted area and favourable weather, which lead to above-average yields.

The industrial sector contributes to 27.5% of GDP (World Bank, 2020) and employs 17.6%, which is dominated by diamond processing, food processing (mostly beef), textiles and mining. Diamond mining and processing is also a major source of government revenue and foreign currency. Copper, gold, nickel and soda ash production also hold a significant place in the economy. While the diamond industry was particularly impacted by the pandemic, especially when it comes to diamond exports, the sector showed a steady rebound in 2021 - a trend which should continue in the coming years.

The service sector is by far the largest component of GDP and accounts for 65.1% of the economy. It employs 62.4% of the active population. The expanding sectors are tourism (notably ecotourism) and transportation. The total contribution of tourism to GDP stands at 11% whereas its total contribution to employment reaches 7.1% (World Travel & Tourism Council 2017). The country has some of the most unique ecosystems in the world and is a major safari destination. Botswana has a growing financial sector and the Botswana Stock Exchange (BSE) is among the best performing stock exchanges in Africa. Although the services sector was hit the hardest during the pandemic, particularly the tourism industry, it showed a significant recovery in 2021 as vaccination rates rose and people's mobility increased - still, the sector is yet to reach pre-pandemic levels.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 19.9 17.6 62.5
Value Added (in % of GDP) 2.1 25.0 63.0
Value Added (Annual % Change) 2.3 -15.9 -5.8

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
67,6/100
World Rank:
51
Regional Rank:
3

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

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Latest Update: April 2022

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