The economy of Botswana is dangerously exposed to the European financial crisis that sees developed nations on the brink of another recession, the country’s Finance and Development Planning Minister Kenneth Matambo has warned.
European countries such as Greece, Italy and Spain are the hardest hit, with Portugal and Ireland also tottering on a precipice.
Further, the IMF recently warned that South Africa’s exposure to the eurozone crisis could transmit to neighbouring states.
South Africa is the SADC region’s biggest economy.
Botswana’s imports are primarily from South Africa while that country’s institutions dominate the local banking and financial sector, as well as the same sector in Namibia, Swaziland and Lesotho in addition to having presence in other SADC countries.
“Adverse shocks affecting South Africa can quickly spread to neighbouring economies through their effect on migrant workers’ incomes, trade, regional investment and finance,” the IMF warned.
“South Africa is more exposed to weaknesses in the world economy - particularly to Europe, which remains a major market for its high value-added exports.”
And according to Botswana’s Finance Minister Matambo, the country’s economy is closely linked to Europe, which buys diamonds, copper and soda ash among other commodities from the Southern African nation.
“If the economic problems in Europe do not improve, government will find it difficult to undertake new projects that were shelved at the start of the economic recession in 2008,” Matambo said.
The economy recorded a 3.1 percent growth in the first quarter of 2012 compared to a decrease of 5.7 percent in the fourth quarter of 2011.
The Central Statistics Office (CSO) says year-on-year growth was 3.2 percent in the first three months of 2012 compared to 9.0 percent in the same quarter in 2011.
The CSO attributes the decline to poor mining sector performance, which recorded a production slump of 7.8 percent.
Other sectors, though, recorded increases over the period; notably construction and water (19.7 percent), and electricity (11.2 percent).
In the 2012 budget, Matambo said Botswana’s economic situation dictated that the country oper