Economic Outline

Economic Indicators

Botswana has one of the strongest economies in Africa, and according to the IMF, GDP grew by an estimated 3.8% in 2023, following a 5.8% growth rate one year earlier. The deceleration was due to weaker demand for rough diamonds. The IMF forecast indicates a gradual rebound in growth for 2024 and 2025, surpassing 4%, driven by increased prices and quantities of diamonds produced. Diamond mining, constituting about 95% of the mining sector, and diamond exports are poised to rise due to increasing demand, notably from the eurozone, its second-largest market, amid a stronger global economy. Furthermore, a new agreement between the Botswana government and De Beers, as part of their 50/50 Debswana diamond mining joint venture, ensures a greater allocation of production to Botswana (30%, increasing to 50% by 2033 from the previous 25%).

Botswana has always maintained a conservative fiscal policy and low levels of foreign debt, and although general government debt increased to an estimated 18.7% in 2023 (from 18% one year earlier), by 2025, the debt-to-GDP ratio is expected to decrease to around 17%, as per the IMF projections. The majority of the budget from the 12th National Development Plan, ratified in March 2023, was directed towards the Ministry of Lands and Water. This allocation aims to fund extensive projects aimed at rehabilitating and expanding existing water networks. Authorities implemented a fiscal expansion in FY2023, which should be succeeded by two years of significant fiscal adjustments, aiming to achieve a minor fiscal surplus by FY2025. Alongside a gradual rebound in diamond production and prices, foreign exchange (FX) reserves are expected to stabilize at around 5 ½ months of imports over the medium term. However, the outlook hinges largely on the demand for diamonds and the trajectory of the global economic cycle. 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. Inflation has declined since August 2022 and is currently below the lower threshold of the central bank's target range. According to the IMF, it stood at an estimated 5.9% in 2023 and should decline to 4.5% by 2025.

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 (Gini index of 53.3) and suffers from a high unemployment rate and a lack of skilled labor. According to the last available data, in 2022, the unemployment rate remained elevated, at around 25% (IMF), and it was especially high among young people. The country’s GDP per capita (PPP) was estimated at USD 18,329 in 2022 by the World Bank.

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