Africa-Press – Botswana. The Monetary Policy Committee (MPC) of Bank of Botswana has maintained the Monetary Policy Rate (MoPR) at 2.4 per cent.
Briefing the media April 26, Deputy Governor, Dr Kealeboga Masalila said headline inflation decreased from 3.9 per cent in February to 2.9 per cent in March 2024, breaching the lower bound of the medium-term objective range of 3-6 per cent.
He said the decrease in inflation was mainly due to the diminishing impact of the increase in domestic fuel prices in the corresponding period in 2023 (base effects).
“Inflation is forecast at 2.3 per cent for April 2024 and the MPC projects that inflation will remain below the lower bound of the objective range temporarily and revert to within the objective range from the third quarter of 2024 into the medium term, averaging 3.2 per cent in 2024 and 5 per cent in 2025,” he said.
Dr Masalila also said the projected low inflation was due to among others, base effects related to the reversal of value added tax from 12 per cent to 14 per cent in 2023, subdued domestic demand and the downward revision in recent forecasts of international food prices.
The risks to this inflation profile/trajectory were assessed to be slightly skewed to the upside, he said. He said the MPC observed that inflation could be higher than projected if international commodity prices increased beyond current forecasts.
This also include persistent supply and logistical constraints and the reversal of global economic integration or geo-economic fragmentation.
Further, he said inflation may be heightened by possible upward adjustment in prices controlled by government (administered prices) not factored in the current projection and any increase in domestic food prices due to prevailing El Niño induced drought conditions in Southern Africa.
However, he said these upside risks were partly offset by the possibility of weaker domestic and global economic activity, and any decrease in international commodity prices.
As for economic performance, Dr Masalila said real gross domestic product (GDP) grew by 2.7 per cent in 2023, compared to 5.5 per cent in 2022, noting that the slowdown was mainly attributable to subdued mining activity.
According to the April 2024 World Economic Outlook, global output growth was forecasted at 3.2 per cent for both 2024 and 2025, the same as in 2023. For Botswana, deputy governor said the Ministry of Finance projected growth to accelerate to 4.2 per cent and 5.4 per cent in 2024 and 2025, respectively.
He said the MPC noted the potential growth-enhancing economic transformation reforms and supportive macroeconomic policies as underpinned by mindset change.
These include the stimulus budget such as supportive monetary and fiscal policies, improvement in water and electricity supply, continuation of the Economic Reform and Transformation Plan as well as the Transitional National Development Plan and other initiatives announced in the Budget Speech in February, he said.
Dr Masalila said the MPC recognised that the economy was expected to operate below full capacity in the short term and not generate demand-driven inflationary pressures.
Although inflation was expected to remain below the lower bound 3 per cent temporarily, it will be within the objective range in the medium term and closer to upper bound in 2025, he said.
Similarly, businesses as reflected in the latest Business Expectations Survey expected inflation to be within the medium-term objective range but closer to the upper bound in 2025, he said.
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