Botswana: Falling Diamond Production Impacts Economic Growth

Botswana’s booming economy has slowed to a 1 percent growth rate in the first nine months of the year due to poor performance in the diamond sector, the economy ministry said on Monday, Spetember 30th.

“The slowdown is mainly due to a decline in diamond production, partly offset by construction projects funded by fiscal expansion,” said a statement from Botswana’s Ministry of Economy. Botswana’s economic growth has slowed in recent years, from 5.5% in 2022 to 2.7% in 2023.

However, with diamond production set to reach 21.1 million carats in 2024, production is expected to slowly increase to 23.3 million carats in 2025 and then 25 million in 2026, it said. The latest report from the International Monetary Fund (IMF) predicts a strong return to growth, with GDP expected to soar to 5.2% in 2025 and 4.8% in 2026.

Botswana’s diamond production might increase next year

“Although risks to the outlook remain elevated, a strong recovery is expected in 2025, driven by the rebound in diamond production and trade,” he notes.

However, the IMF stresses that the economic outlook is very uncertain, with the emergence of cheaper synthetic diamonds on the market.

“A decline in diamond revenues could be offset by an increase in the budget deficit and a reorientation of priorities in terms of investment spending,” he notes.

The international financial institution also notes that Botswana’s financial sector is broadly sound, stable and resilient, although the budget deficit is expected to widen further to 6% of GDP, reflecting a further decline in mining revenues and increased spending. It also notes that inflation has remained within the central bank’s medium-term target range since July 2023 and is expected to remain low.

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(Featured image by Leah Newhouse via Pexels)

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First published in LES ECO.ma. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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