Botswana's growth forecast at 4.1%

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Botswana's economic growth could be slower than previously anticipated as a weaker global economy knocks demand for diamonds, a Reuters poll showed on Tuesday.

Gross domestic product in the land-locked nation will only expand 4.1 percent this year from 5.1 percent last, but accelerate to 5.1 percent in 2013, the poll of ten economists found.

A similar survey in March projected growth at 5.2 percent this year and 5.4 percent next.

At the end of 2011 the economy shrank 5.8 percent on a quarter-on-quarter basis, as mining output contracted sharply, after expanding by 5.5 percent in the previous quarter.

Diamond mining is the mainstay of the southern African nation, accounting for about a third of overall output, and some economists nudged down growth forecasts on global uncertainty - mainly due to a struggling US economy, the world's biggest consumer of polished diamonds, and a slower Chinese economy.

Growth predictions for a diamond exporting nation like Botswana tend to vary widely amongst forecasters because of price uncertainty associated with the precious stone, with a bearish bias in times of uncertain global headwinds.

Forecasts in the poll for 2012 growth ranged from 3.9 to 7.0 percent.

“The current fragile external environment poses considerable uncertainty on the global economic outlook and mineral export demand,” said the International Monetary Fund in their recent visit to the country.

Even with the slowdown tiny Botswana still punches above Africa's heavyweight South Africa, which is expected to grow around 2.8 percent this year.

Consumer inflation had been slowing in Botswana since January but increased to 7.7 percent year-on-year in May from 7.5 percent in April.

Inflation is likely to average 7.9 percent this year and ease to 6.7 percent in 2013, the poll predicted.

“We expect that the disinflationary trend will continue for the rest of the year,” said Standard Bank in a client note.

Like nearby South Africa, Botswana targets keeping inflation between 3 and 6 percent, and the central bank has held the benchmark interest rate at 9.5 percent since making a 50 basis point cut in the fourth quarter of 2010.

Inflation in South Africa has been hovering just above the top of the target and is expected to ease back into target in the coming months. - Reuters


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