Deepening   Integration in SADC:     Macroeconomic   Convergence Issues       for Botswana           July 2006          Ke...
Baseline Study for SADC       Macroeconomic   Convergence Programme          Under FIP:   Overview of Preliminary         ...
Secondary Macroeconomic   Convergence Indicators                 Year         2008            2012              2018   Eco...
% of GDP                                                                                                % of GDP          ...
% GDP                                                                                       % of GDP                  -25%...
GDP growth           8%           7%           6%           5%% of GDP                 SADC target           4%           ...
Country Responses Considerable variation: – Availability of macroeconomic data,   especially for official forecasts – Avai...
Botswana weaknesses Poor quality of macro data in some areas Lack of updated, publicly available macro forecasts/projectio...
Key Economic Challenges Boosting investment and long-term economic growth Reducing poverty & unemployment Managing impact ...
Policy Recommendations All govt. policies to focus more on efficiency, productivity and competitiveness Improve economic f...
Impact of Regional          IntegrationImpact & Relevance ofRegional Integration Trade growth important for Botswana But s...
Implications of Long-termRegional Integration Plans SADC Customs Union – Revenue distribution, compensation – Expand SACU?...
Questions and Problems Purpose of convergence programme / indicators? – SADC FIP, but beyond that? – monetary union requir...
Questions and Problems Strict, active convergence not needed for general economic (trade etc.) integration Only needed for...
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2006:SADC Macroeconomic Convergence Programme

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2006:SADC Macroeconomic Convergence Programme

  1. 1. Deepening Integration in SADC: Macroeconomic Convergence Issues for Botswana July 2006 Keith JefferisStructure of Presentation Botswana Convergence Results in Regional Context Botswana Recommendations Impact of Regional Integration on Botswana SADC Macro Convergence Programme Issues 1
  2. 2. Baseline Study for SADC Macroeconomic Convergence Programme Under FIP: Overview of Preliminary ResultsPrimary MacroeconomicConvergence Indicators Year 2008 2012 2018Inflation <9.5% <5% <3%Deficit/GDP >5% >3% >1%Debt/GDP <60% <60% <60%Current <9% <9% <3%Ac/GDP 2
  3. 3. Secondary Macroeconomic Convergence Indicators Year 2008 2012 2018 Econ growth 7% 7% 7% FX res (imp. 3 6 6 cover, m) CB cred to 10% 5% 5% gov (% rev) Dom. S (% 25% 30% 35% GDP) Dom. I (% 30% 30% 30% GDP)Inflation 20% 18% SADC target 16% 14% 12% 10% 8% 6% 4% 2% 0% Les Les Zam Zam Moz Moz Bots Bots Mal Mal Nam Nam 04 07 04 07 04 07 04 07 04 07 04 07 3
  4. 4. % of GDP % of GDP -10% -8% -6% -4% -2% 0% 2% 4% 6% -25% -20% -15% -10% -5% 0% 5% Le Le s s 04 04 Le Le s s 07 07 grants) grants) Za Za m m 0 0 Za 4 Za 4 m m 07 07 M M oz oz 04 04 M M oz oz 07 07 Bo Bo ts ts 0 0 Bo 4 Bo 4 ts ts 07 07 SADC target SADC target Budget balance (incl. M M Budget balance (excl. al al 04 04 M M al al 07 07 N N am am 04 04 N N am am 07 074
  5. 5. % GDP % of GDP -25% -20% -15% -10% -5% 0% 5% 10% 15% Le 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% s Le s 200% 04 04 Le Le s s 07 07 Za Za m m 0 0 Za 4 Za 4 m m 07 07 Public Debt M M oz oz 04 04 M M oz oz 07 07 Bo Bo ts ts 0 0 Bo 4 Bo 4 ts ts 07 07 SADC target SADC target M M al al 04 04 M M al Current Account of BoP al 07 07 N N am am 04 04 N N am am 07 075
  6. 6. GDP growth 8% 7% 6% 5%% of GDP SADC target 4% 3% 2% 1% 0% 04 07 04 07 04 07 Za 4 07 Bo 4 07 04 07 0 0 al al am am oz oz m m ts ts s s Le Le M M Za Bo M M N N Country Responses Considerable variation: – Degree of integration of SADC convergence programme into policy framework – Degree of attention devoted to convergence issues – Openness to discussion of difficult / critical issues – Willingness to question aspects of SADC convergence programme 6
  7. 7. Country Responses Considerable variation: – Availability of macroeconomic data, especially for official forecasts – Availability of independent reports / commentary / analysis – Capacity to continue convergence monitoringBotswana Findings Botswana’s convergence performance good, due to long-term economic record No major macroeconomic imbalances Will meet primary convergence targets BUT - concerns about long-term growth prospects Several worrying findings 7
  8. 8. Botswana weaknesses Poor quality of macro data in some areas Lack of updated, publicly available macro forecasts/projections Sensitivity to (constructive) critical comment – major contrast with IMF programme countries Botswana Recommendations 8
  9. 9. Key Economic Challenges Boosting investment and long-term economic growth Reducing poverty & unemployment Managing impact of HIV/AIDS Ensuring fiscal sustainability Promoting economic diversification Facilitating new sources of exportsKey Constraints Real exchange rate - overvalued Inflation & interest rates – too high Impact of HIV/AIDS – growth, fiscal Productivity – too low High costs of doing business – Unavoidable (location, water) – Manageable (bureaucracy) Complacency/slow policy implementation 9
  10. 10. Policy Recommendations All govt. policies to focus more on efficiency, productivity and competitiveness Improve economic flexibility and adaptability Inflation a key problem – linked to productivity Resolve exchange rate and monetary policy conflicts (active MP and pegged XR) Strengthen trade policy formulationPolicy Recommendations Resolve FIAS, WBDB issues – Business licensing, Land – Skills & Recruitment, Work permits Speed up deregulation and privatisation Improve trade policy coherence – Trade facilitation – Liberalisation vs. protectionism – Use SACU to promote interests 10
  11. 11. Impact of Regional IntegrationImpact & Relevance ofRegional Integration Trade growth important for Botswana But smaller SACU members will not be main beneficiaries of SADC trade integration Botswana’s main gains from: – Liberalisation of trade in services (non-SACU) (non- – Trade facilitation, NTBs, administrative barriers NTBs, – Reduction of SACU tariffs vs. region and RoW 11
  12. 12. Implications of Long-termRegional Integration Plans SADC Customs Union – Revenue distribution, compensation – Expand SACU? SADC Common Market – Labour mobility? SADC Monetary Union – too big and dissimilar? – XR and monetary policy implications – expand CMA? Outstanding Issues –SADC Macro Convergence Programme 12
  13. 13. Questions and Problems Purpose of convergence programme / indicators? – SADC FIP, but beyond that? – monetary union requires convergence, but not general regional economic integration; – can provide useful regional peer review mechanism (alt to IMF/WB), but what sanction? – indicators seen as “imported” (Maastricht), need imported” further thought and refinementQuestions and Problems General regional economic integration requires macroeconomic stability: – supports higher growth – reduces regional risk and uncertainty, boosts investment flows – will lead to passive convergence – but other constraints to intra-regional trade intra- (NTBs, slow liberalisation) more of a problem NTBs, Slow progress on FTA undermines credibility of broader integration, along with overlapping RIAs 13
  14. 14. Questions and Problems Strict, active convergence not needed for general economic (trade etc.) integration Only needed for monetary union, but this is far distant; Both timetable and MU process lack credibility; not on policy radar screen Monetary union needs further analysis on desirability, feasibility and timetable If pursued, needs policy convergence (exchange rate & monetary policy) as well as indicator convergence Thank You 14

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