Botswana’s business community expects the economy to recover modestly this year, but the outlook remains clouded by weak demand, constrained government spending and high financing costs.
The Bank of Botswana’s June Business Expectations Survey shows firms expect national output to expand by 2.1 percent in 2026, following a 0.7 percent contraction in 2025. Growth of 1.3 percent is expected in the second quarter and 1.8 percent in the third quarter.
Despite the expected recovery, businesses remain cautious about near-term conditions. Firms in construction and real estate, finance, retail, accommodation, transport and communication, and manufacturing were pessimistic about the second quarter.
The concerns extend into the third quarter, with pessimism reported among retail, accommodation, transport and communication, construction and real estate, and agriculture firms. Mining and quarrying businesses were neutral.
The survey points to Botswana’s weak fiscal position as an important drag on activity. Lower government revenue, partly linked to weaker diamond export earnings, has constrained cash flows and limited government spending. Businesses also cited the exchange rate as a concern because of the economy’s heavy reliance on imported inputs.
Cost of finance was identified as the biggest factor hurting business operations during the second quarter. High borrowing costs, collateral requirements and cautious bank lending were cited as constraints. Some firms are responding by relying more heavily on retained earnings: their share rose to 53 percent from 50 percent in the previous quarter, while preference for loans fell from 43 percent to 28 percent.
The outlook improves further ahead. Firms are optimistic about conditions over the 12 months to June 2027, particularly in manufacturing, construction and real estate, retail and related services.
Export-oriented firms are already more positive, suggesting the weaker pula may be improving their competitiveness. Overall, the survey presents a recovery that remains tentative.