Botswana confidence down as global recession weighs

JOHANNESBURG – Business confidence in Botswana has fallen sharply as the effects of the global economic and financial crises weigh on domestic output, the central bank said on Monday.

The global slowdown has slashed demand for the southern African country’s main produce, diamonds, and rating agencies say it faces deep contraction over the next two years.’Overall business confidence currently stands at only 40 per cent, compared with 82 per cent in the previous survey that was conducted prior to the impact of the global recession on Botswana being … clearer,’ the bank said.A survey of 100 businesses in agriculture, mining, manufacturing, water and electricity, construction, trade, transport, and financial and business services showed that while the immediate impact was concentrated in diamond mining in particular, other sectors had also been affected.The survey, conducted between March and May, covered the first and second halves of 2009 as well as the 12 months to June 2010.’The survey was carried out at the time when the effects of the global economic and financial crises had started to severely affect the domestic economy,’ it said.’It might be anticipated that, especially in the context of pervasive uncertainty as to the duration of the slowdown, this will have a broader, negative impact on business sentiment.’Debswana, a 50/50 joint venture between the government and De Beers, in February decided to shut diamond operations until April 14 and has suspended production at two mines for the rest of the year.The central bank said the sharp contraction in mining had serious implications for the government budget, with current projections indicating a period of extensive budget deficits.But expectations were still for positive GDP growth of 2,8 per cent in 2008/09 and 2,6 percent in 2009/10.’While this is substantially lower than in the previous survey, when growth of six per cent was expected for 2008/09, it remains optimistic given that the suspension of diamond production … will have a substantial negative impact on overall GDP, particularly in 2008/09,’ the bank said.It said businesses had revised their expectations on inflation downwards, with the average now seen at 10,7 per cent in 2009 and 10,5 per cent in 2010, respectively.This is compared to an average of 12,2 percent for 2009 seen in the previous survey.-Nampa-Reuters