Botswana holds rate, inflation seen in 3-6% target range

    Botswana's central bank maintained its bank rate at 7.5 percent, saying the economic outlook and inflation forecast is consistent with keeping inflation in the bank's 3-6 percent medium-term objective.
    The Bank of Botswana, which cut its rate by 200 basis points in 2013 as inflation declined, said moderate domestic demand and expected benign external prices contribute to the positive inflation outlook though this could be affected by unanticipated large increases in administered prices and government levies as well as international food and oil prices beyond the current forecast.
    Botswana's inflation rate eased to 4.4 percent in March from 4.6 percent in February, with the trimmed mean measure of core inflation down to 4.0 percent from 4.1 percent and inflation excluding administered prices down to 5.2 percent from 5.5 percent.
    Botswana's headline inflation rate fell to 5.8 percent in 2013 from 7.5 percent in 2012 and the central bank expects inflation to remain within its 3-6 percent range this year.
    The bank said in February this would give it scope to support economic activity through the current accommodative policy stance.
    The International Monetary Fund has forecast 3.8 percent inflation this year and 3.4 percent in 2015.
    The central bank said Botswana's economy was estimated to have expanded by 5.9 percent in 2013, reflecting a 10.6 percent growth in mining output and 5.2 percent growth in the non-mining sector.
    "It is expected that non-mining GDP will remain below potential in the medium term and this will result in low inflationary pressure," the bank said, adding the influence of demand on economic activity is projected to be modest, mainly reflecting trends in government spending and personal income.
    The central bank has forecast economic growth of 5.1 percent in 2014, supported by higher government spending. It said in February that government spending for fiscal 2014/15 had risen by 8.5 percent.
    The IMF has forecast 4.1 percent real GDP growth this year and 4.4 percent in 2015.

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