(Updates with central bank Governor comment starting in third paragraph.)
June 15 (Bloomberg) -- A state-worker strike in Botswana, the world’s biggest diamond producer, and a ban on beef exports to the European Union will have a “short-term effect” on the country’s economy, central bank Governor Linah Mohohlo said.
Economic growth probably won’t exceed the 7.2 percent expansion of 2010, Mohohlo told reporters today in Gaborone, the capital.
“We do not want to talk about the effects of the strike as yet but definitely it will impact on the growth of the economy this year,” she said. “This might reverse the gains of economic recovery recorded so far.”
State workers, including nurses and teachers, went on strike for eight weeks to demand a 12 percent pay increase. Schools temporarily closed and police fired tear gas to break up demonstrations, according to labor union officials. The unions suspended the protest on June 13 after the government refused to raise its offer from 3 percent. Shipments of beef from the southern African nation to the EU were halted in March after the country didn’t meet European safety requirements, according to the government.
Botswana’s economy rebounded last year following a 3.7 percent contraction in 2009 when the global financial crisis cut demand for diamonds.
Demand for gems, particularly from emerging economies, continued to improve this year and should support growth, Mohohlo said. A decline in government spending, as the state tried to reduce its budget deficit, will probably curb the rate of expansion, she said.
The state plans to cut the fiscal deficit to 6.3 percent of gross domestic product in the fiscal year through March 2012 and has pledged to balance the budget by 2013, Minister Kenneth Matambo said on Feb. 7. The shortfall widened to 12 percent of GDP in 2009.
The Bank of Botswana kept its benchmark interest rate at 9.5 percent to help boost the economy and with inflation forecast to ease to within its 3 to 6 percent target range by the second half of next year, the central bank said yesterday. Inflation was 8.2 percent in April, according to the country’s statistics office.
Slower growth in disposable income would help to ease inflation, Mohohlo said today.
--Editors: Gordon Bell, Digby Lidstone
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