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International trade

Botswana's Economic Crisis Deepens as World Bank Cuts Growth Forecast

Strategic Insights

— 2 min read

Botswana is grappling with a severe economic crisis, with the World Bank reducing its growth forecast for the country to 0.6% due to weak diamond markets. The country's finance minister had projected 3.3% growth in the 2025 Budget, but the World Bank warns that the outlook remains uncertain and depends heavily on the diamond market's trajectory. The Bank highlights risks on both international and domestic fronts, including climate-related disruptions, worsening fiscal pressures, and inadequate structural reforms.

Key Takeaways:

  • The World Bank has cut Botswana's economic growth forecast to 0.6% due to weak diamond markets, a significant downgrade from the 3.3% growth projected in the 2025 Budget.
  • The Bank warns that poverty is projected to remain high at 14% in 2025, affecting around 358,000 people, due to negative GDP per capita growth and low labor intensity of the sources of growth.
  • The economy contracted by 3.0% in 2024, with mining contracting by 24.1% and the value of diamond inventories reaching US$2 billion, the highest since the 2008 Global Financial Crisis.
  • The World Bank stresses the need for economic diversification beyond diamonds, citing its limited role in the country's economy, which provides almost 90% of its export revenues.
  • Improving agricultural resilience and sustainability is crucial for job creation, as the sector employs about 9.6% of the labor force (or 18% when subsistence farmers are included).
  • The unemployment rate increased to 27.6% in 2024, and poverty is projected to increase to 13.7% in 2024 under the $2.15 poverty line (2017 PPP).

Statistics:

  • 0.6%: Botswana's economic growth forecast for 2025, as reduced by the World Bank.
  • 3.3%: Growth projected in the 2025 Budget, announced in February.
  • 14%: Poverty rate projected in 2025, affecting around 358,000 people.
  • 13.7%: Poverty rate projected in 2024 under the $2.15 poverty line (2017 PPP).
  • 27.6%: Unemployment rate in 2024.
  • 9.6%: Share of labor force employed in agriculture, about 18% when subsistence farmers are included.
  • US$2 billion: Value of diamond inventories in December 2024, the highest since the 2008 Global Financial Crisis.
  • 0.6%: Projected growth in 2025, driven by a gradual recovery in the diamond market and infrastructure investment.
  • 4.0%: Medium-term growth projection for Botswana.

Sources:

  • World Bank. (n.d.). Macro Poverty Outlook for Botswana.
  • World Bank. (n.d.). Botswana Overview.
  • World Bank. (n.d.). Poverty and Inequality in Botswana.
  • World Bank. (n.d.). Botswana Economic Diversification.

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