Botswana’s economic trajectory is facing headwinds, potentially leading to slower growth than government forecasts, according to new data and expert analysis.
Recent survey results and projections paint a concerning picture, with local economists suggesting that Botswana’s economy may underperform the Ministry of Finance’s initial estimates for the year. A survey by the Bank of Botswana (BoB) reveals that domestic firms anticipate a 1.9 percent expansion, while the research firm Econsult projects a zero percent growth rate. These figures fall short of the Ministry’s projected 3.3 percent growth.
The anticipated deceleration in economic growth coincides with the continued underperformance of the mining sector, a critical pillar of Botswana’s economy. The economy experienced a contraction in 2024, with a negative 3.0 percent year-on-year growth rate, a stark contrast to the 3.2 percent growth recorded in 2023. This downturn was primarily driven by a slowdown in the diamond industry, resulting in a significant decline in output across diamond mining, trading, cutting, polishing, and exports.
Fresh data indicates a further decline in diamond industry output for 2025, which is expected to exert considerable macroeconomic pressure on Botswana. Econsult’s recent economic review for the first quarter of 2025 noted that the global diamond market showed signs of stabilization at the beginning of the year, following a challenging 2024, raising hopes for a modest recovery. However, Econsult cautioned that “the same factors that have weighed on the market since 2023 continue to be worrying – competition from lab-grown diamonds and weak demand from China. Combined with a high level of inventory throughout the diamond value chain, this has resulted in poor prospects for diamond mining.”
In response to these challenges, De Beers has revised its 2025 production guidance downward to 20-23 million carats from an initial 30-33 million carats. Similarly, Debswana has reduced its 2025 production target to 15 million carats, a decrease from the 18 million carats produced in 2024. De Beers’ sales for the first quarter of 2025 were 44% lower than in the same period in 2024, reflecting a 38% drop in average prices and a 4% decrease in carats sold. Debswana’s production also experienced an 8% year-on-year decline. Econsult warns that this will significantly impact Botswana’s growth outlook for 2025. The research firm emphasizes that the diamond sector is heading for a deep recession, which will not only drag down overall economic growth but also negatively affect exports, the balance of payments, foreign exchange reserves, government revenues and debt, and these will in due course have an impact on the rest of the economy.
Dr. Keith Jefferis, Managing Director of Econsult, researcher, and economist, has observed considerable uncertainty in Botswana’s economy in the early months of 2025, extending beyond the first quarter into April. He suggests that Botswana’s economy, which contracted in 2024, may contract again or experience minimal growth this year. Dr. Jefferis also cautioned that the tariffs announced by the United States government in April are likely to be highly disruptive, particularly for the diamond sector. He stated that “the GDP growth outlook for 2025 is highly uncertain. Our current estimate is that GDP will be flat, with zero percent growth. The projected further reduction in diamond output will drag down overall growth, as in 2024, offsetting hoped-for positive growth in the non-diamond sector. The uncertainty surrounding the impact of the new US tariffs, both on the US diamond market and global growth more broadly, makes a less favorable outcome a distinct possibility. The IMF, for instance, is projecting -0.4% growth for Botswana in 2025.”
Dr. Jefferis emphasized that the challenges and risks facing Botswana’s economy necessitate the implementation of long-needed reforms to improve the business climate and stimulate private sector growth. He expressed hope that the new government, now in office for almost six months, will introduce specific reforms to stimulate growth across various sectors. Dr. Jefferis identified critical measures with the potential to transform Botswana’s economy, including regulatory reforms, liberalization of immigration rules, opening up of borders, reform of restrictive public procurement rules, and addressing inefficient state-owned enterprises that are crowding out the private sector.
