Botswana's Economy Expected to Contract 1.7%

Botswana's economy is expected to shrink by 1.7% this year, primarily due to a significant decline in diamond sales, which are critical to the nation's budget revenues. Finance Minister Ndaba Gaolathe warned that this downturn could represent the worst economic contraction since the pandemic began in 2020, with risks including further disturbances in the diamond market, severe weather events, and issues with the country's main power plant. The initial forecast for growth had been 4.2%, but the current situation has forced a reevaluation, leading to a projected budget deficit of 6.7% of GDP, significantly higher than earlier estimates. Gaolathe indicated that recovery is anticipated in the following year, with expected growth rates between 4% and 5% as global diamond markets improve. The heavy reliance on diamond mining, which accounts for about a third of government revenues, underscores the vulnerability of Botswana's economy to fluctuations in this sector. The finance ministry is implementing cost-cutting measures to align spending with revenue projections and aims to achieve a balanced budget promptly.