The Botswana economy is expected to grow by about 6.2 percent for the rest of 2011, although there are high downside risks to the positive outlook, economists at the Standard Bank Group reckon.

In its September 2011 outlook for African markets, the banking group says strong export growth, particularly that of diamonds, will continue to boost the economy in 2011 as the country reaps the rewards of the surge in diamond prices, which are driven largely by Asian demand rather than the traditional US demand.

As a result, the economy's real GDP is expected to rise 6.2 percent this year before growing by 6.3 percent next year.

Last week, researchers at the IMF also said they expected the Botswana economy to grow by 6.2 percent this year, an upward revision from the six percent they had forecast in April. The IMF, however, expects the rate of growth to slow down to 5.3 percent next year.

The Standard Bank Group, which is Africa's largest bank by assets, is the parent company to Stanbic Bank Botswana.

Said Stephen Bailey-Smith, Standard Bank Group's Head of Africa Research. "Polished diamond prices are marginally below the record high reached in July 2011 but 22 percent above the July 2008 peak.

"Personal consumption expenditure (PCE) is likely to be relatively subdued as households adjust to the wages foregone in the civil servants strike. Gross fixed capital formation (GFCF) is likely to be strong on the back of infrastructure investment and new mining investments.

"Net exports are likely to be in surplus on strong exports. We expect the trade account to show a small surplus in 2011 while high polished diamond prices are likely to continue to drive export earnings higher."

Copper and nickel exports are also projected to support the trade account as imports are expected to rise, but at a slower pace than exports. Risks to the positive trade outlook are global growth slowdown and lower diamond prices.

The analysts expect foreign exchange reserves of $8.5 billion (P61bln) in December 2011.

On the fiscus, the report predicts less pressure on the budget balance on projections of higher revenues from SACU.

According to South Africa's Budget Review 2011, total SACU payments are projected to rise by 21.6 percent year-on-year in 2011/12 to R21.76 billion (P19.8bln) from R17.89 billion in 2010/11 (including a 19.3% upward adjustment).

In 2012/13, total SACU payments are projected to rise by another 49.0 percent, to R32.43 billion (USD4.4bn). "The higher SACU total revenue will take some pressure off recipient members' budgets, including Botswana's," the report added.

"Total SACU payments dropped by 35.9 percent year-on-year in FY2010/11. Union members' share of the pool will be affected almost equally. SACU revenue contributed 26.4 percent to Botswana's total revenue in the year 2009/10. This contribution will now be higher. Higher mining taxes will also support total revenue."

However, the improved outlook, analysts said, would depend on sustained global growth. Almost half of the 20 African economies included in Standard Bank's Africa outlook are expected to grow in excess of 6.0 percent in 2011, with growth in the fastest growing economy in the world, Ghana, reaching 16.3 percent.

The Group says the downward pressure on global economic growth will almost certainly impact the growth outlook for the African continent. The growth outlook for the whole Africa should drop by 0.5 percentage points to around 3.5 percent in 2011 and 2012.

The Standard Bank Group projects a similar slide in the weighted sub-Saharan African growth outlook to around 5.0 percent from around 5.5 percent in 2011 and a similar trajectory for 2012.