Construction in sluggish recovery

BG reporter Construction output expanded modestly in the past three months ending March 2012 while mining reluctantly returned to the pre-recession period, according to latest figures from Statistics Botswana. National output or GDP increased 3.1 percent quarter on quarter (q/q) in the first quarter of 2012 (Q1; 2012) when compared to Q1: 2011 figures. Construction contribution to the GDP (by economic activities at current prices) increased 27 percent q/q from P1.5 billion in Q1: 2011 to P1.9 billion in the period under review, but remained flat year-on-year (y/y) between Q4 2011 at P1.8 billion to Q1 2012 at P1.9 billion. The 5.5 percent increase between the two corresponding years (Q4: 2011 and Q1: 2012) signals lackluster economic growth due to significant reduction in government expenditure according to observation by market watchers. Quarterly GDP output by economic activities at constant 1993/94 indicates that the sector‘s contribution stood at P508.4 million from P485.7 recorded in Q4 2011, however with anticipated sharp decline in government spending, the industry is now expected to remain subdued. “The construction sector expanded on a q/q basis, but decline to 19.7 percent y/y during Q1 2011 from 23.5 percent y/y the previous quarter reflecting reduction on government expenditure,” Motswedi Securities Market analyst Garry Juma observed. The total output of the construction sector grew by 16 percent making it one of the sluggish growing sectors in 2011. Construction was the fifth contributor by type of economic activity at constant 1993/94 prices. The sector is now expected to see a fall in output in the next quarters due to ongoing fiscal consolidation and the completion of most government infrastructure projects. “We expect the sector growth to remain subdued due to the reduction of government expenditure,” Juma said. Botswana has a small, but dynamic, construction sector, which contributes approximately 5 percent to GDP. The mining sector struggled to beat the P11 billion recorded in Q3: 2008 as it remained subdued at P9.9 billion (in Q1 2012). Led by diamond mining, the sector grew 9.7 percent, which tends to display an inverse correlation to mining optimism considering that the sector grew 52 percent in Q1: 2010 and 25 percent in Q3: 2010, while water and electricity shrunk by 20 basis point (-2.0 percent).