BMI revises down Botswana’s economic growth forecast for 2026

Global research firm Business Monitor International (BMI) has recently downgraded Botswana’s projected economic growth for 2026, citing ongoing risks and challenges confronting the nation’s economy. Following a 3.8 percent expansion in 2023, Botswana’s economy contracted by 3 percent in 2024. The primary drag on economic activity was subdued output in the mining and quarrying sector.

Weak global demand for diamonds compelled Botswana’s miners to curtail production to avoid accumulating unprofitable inventory. This extended and deeper-than-anticipated downturn in the diamond market triggered an economic contraction during the first half of 2025. Nonetheless, recent data from the third quarter of 2025 reveals a robust recovery, with the economy expanding by 8.2 percent, the strongest quarterly growth since Q3 2021.

This rebound was underpinned by a resurgence in diamond trading, mining production, and improvements across select non-mining sectors. Despite this impressive quarterly growth, macroeconomic headwinds in the global diamond market are expected to temper Botswana’s recovery trajectory through 2025. Current forecasts suggest a modest 0.9 percent economic expansion for the year.

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BMI’s latest projections estimate a 2.3 percent growth rate in 2026, a downward revision from the 2.7 percent forecast issued in 2025. This figure also falls short of the government’s more optimistic 3.1 percent growth target announced by Finance Minister Ndaba Gaolathe during the recent presentation of the 2026/2027 budget. BMI’s updated outlook underscores the elevated risks facing Botswana’s economy in 2026.

“The 2026 upturn of 2.3%, from estimated growth of just 0.9% in 2025, will be narrow and externally influenced, with the recovery still heavily dependent on the diamond cycle and a stabilization in mining activity rather than a broad-based rebound. Downside risks remain elevated, particularly from high diamond inventories and soft global demand, as well as uncertainty around De Beers’ future ownership, which could delay investment decisions and keep mining output volatile,” the firm stated. The research outfit anticipates that fixed investment will emerge as the principal driver of economic activity in 2026, albeit with restrained gains.

Data from BMI reveals fixed investment is projected to contribute 0.9 percentage points to GDP growth in the year ahead. This investment outlook is buoyed by committed capital expenditure in mining, notably the Jwaneng Cut 9 project, alongside targeted initiatives linked to the government’s 12th National Development Plan (NDP12), which prioritizes infrastructure development, mining support, and economic diversification. “Copper-related investment will also provide incremental support, benefiting from elevated prices and renewed exploratory activity.

However, gains are likely to be modest. Diamond market uncertainty and elevated inventories will keep discretionary mining and mining-adjacent expansion cautious, De Beers’ strategy uncertainty may delay multi-year commitments, and tight liquidity will continue to restrain non-mining private capex. This points to a measured recovery in investment rather than a broad capex cycle,” BMI explained.

Analysts from the firm further indicate that government consumption, the second largest contributor to economic activity, is expected to be constrained by reduced diamond revenues and new austerity measures designed to bolster fiscal stability. Forecasts suggest government consumption will provide limited stimulus to growth but remain supportive of economic activity in 2026. “Government consumption should remain supportive in 2026, contributing 0.6 percentage point to growth.

We see fiscal policy remaining constrained by a structurally weaker diamond revenue backdrop and the need to manage buffers, limiting scope for a large demand-side stimulus. Nonetheless, state spending will help stabilize growth, rather than expand it.” Private consumption, another potential engine for economic recovery, is projected to remain subdued in 2026, weighed down by rising inflation, constrained disposable incomes, and tightened credit conditions. Inflation accelerated in the latter half of 2025, climbing from 1.1 percent year-on-year in July to 3.9 percent in December.

While expected to remain within the Bank of Botswana’s 3.0 to 6.0 percent target range, BMI analysts forecast average inflation of 4.4 percent in 2026. The analysts anticipate that the Bank of Botswana’s monetary policy committee will adopt a more accommodative stance following a policy recalibration in October 2025, with a likely 50 basis-point cut to the policy rate, bringing it to 3.00 percent in the second half of 2026. “With diamond-sector weakness constraining workers’ incomes and credit conditions remaining restrictive compared with 2022-2024 levels, household demand will be subdued, meaning that private consumption is unlikely to broaden recovery meaningfully in 2026,” the analysts concluded.

Private consumption is expected to contribute a modest 0.1 percentage point to GDP growth this year. In response to these challenges, the Finance Ministry has announced plans to enhance policy coordination and accelerate economic diversification alongside private-sector-led growth initiatives. The Ministry believes these measures hold promise for fostering a more resilient, diversified, and sustainable economic future for Botswana.

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