Botswana halved its 2015 growth forecast due to expected weakness in the diamond market, the finance ministry said in a 2016/17 budget strategy paper on Thursday.
The government now expects the economy of the world’s biggest diamond producer to grow by 2.6 percent this year. In February, Finance Minister Kenneth Matambo had announced a growth target of 4.9 percent for 2015.
The southern African nation is now seen posting a deficit of 4.03 billion pula ($394 million) or 2.61 percent of the gross domestic product against a previous estimate of a surplus of 1.23 billion pula or 0.8 percent of GDP.
“The domestic economy is forecast to grow by 2.6 percent in 2015, underpinned by expected decrease in demand for diamonds in the global market,” the strategy paper said.
“A higher growth rate of 4.9 percent in projected for 2016. However, the downside risk to these projections continues to be the country’s high dependence on diamonds, whose demand and prices are subject to global fluctuations.”
A sustained weakness of the diamond market throughout the year has seen diamond prices softening while annual output targets have also been trimmed.
Sluggish sentiment in the market has seen both De Beers and Botswana’s Okavango Diamond Company (ODC) sales falling by over 20 percent in the first half of this year.
De Beers, whose sales fell 21 percent in the first six months of the year, last month trimmed production targets for 2015 due to globally weaker diamond demand.