Botswana’s economy is showing signs of recovery, but a heavy reliance on diamond production, weakening private-sector activity and mounting pressure on households threaten to undermine the rebound, according to a new economic review by Econsult.
The consultancy’s third-quarter 2026 review forecasts economic growth of 3.3% for the year, which would be the strongest annual expansion since 2022. However, it warns that the recovery remains narrowly based, with mining accounting for much of the improvement.
Annual GDP growth accelerated to 3.7% in the second quarter, up from 0.2% in the previous quarter, largely reflecting a recovery in diamond production.
But Econsult cautions that increased production has not necessarily translated into stronger export earnings, with much of the additional output believed to have accumulated in stockpiles rather than being sold.
‘Growth driven by increased but unsold diamond production therefore has little wider economic benefit,’ the report says.
The disconnect is evident in household spending. Despite an 8.7% increase in quarterly GDP in the second quarter, real household consumption fell 7.2%, highlighting the limited benefits of the production-led recovery.
Outside mining, the non-diamond private sector recorded annual growth of just 1.6%, underscoring the challenges facing efforts to diversify the economy.
Agriculture was among the worst-performing sectors, contracting 5% in the second quarter as Foot and Mouth Disease restrictions disrupted livestock movement and slaughtering. Livestock output plunged 48% year-on-year, while meat-processing output declined 61%.
The trade position has also deteriorated. Botswana’s visible trade deficit widened to P17.6 billion in the seven months to July, compared with P4.8 billion during the same period last year.
Exports declined 22%, while imports increased 6%, partly reflecting a 57% jump in fuel imports during the second quarter compared with the first.
Meanwhile, inflation eased to 7.8% in September from 10.7% in June. However, Econsult warned that the decline could prove temporary because domestic fuel prices have not fully adjusted to higher international costs.
The consultancy estimates that compensation to oil-importing companies for the gap between import costs and regulated pump prices exceeds P400 million a month.
Financial conditions remain another concern. Bank credit contracted 2.2% in the year to July, marking the weakest growth in three decades, as high borrowing costs and subdued business confidence weighed on lending.
There are, however, some encouraging developments. Foreign exchange reserves reached P63.2 billion at the end of July, up P15.4 billion over 12 months, while government borrowing costs have started declining.
Econsult expects lower interest rates to eventually revive lending, but warns that fiscal pressures will persist.
The report says Botswana must accelerate structural reforms to address constraints on private-sector expansion, including over-regulation, restrictive immigration policies and difficulties accessing land.
While the recovery is welcome, the broader challenge remains turning increased mineral production into sustainable economic growth that reaches businesses and households.