Bereng Mpaki
THE Central Bank of Lesotho (CBL) has estimated that the country will record a 2.2 percent growth in 2020.
While the projected growth rate is an improvement of the 2019 projection of 1.7 percent growth, it is dwarfed by the anticipated 4.1 percent growth for 2021.
This is according to the CBL’s recent economic outlook for 2019 to 2021.
The projected growth is expected to be hinged on the construction sector projects for the Lesotho Highlands Water Project (LHWP) phase II, the Lesotho Lowlands Water Development Project (LLDWP) and other government projects.
“Growth is projected at 1.7 percent in 2019 before picking up to 2.2 percent in 2020,” the CBL said in a statement.
“In 2021, growth is expected to accelerate to 4.1 percent.
“Domestic growth is expected to pick steadily albeit being highly sensitive to rapidly changing implementation schedules of ongoing major construction projects. The annual growth rate is expected to average 2.7 percent in the medium term.
“Growth is anticipated to be mainly boosted by buoyant construction related projects including construction works associated with the second phase of the LHWP II, LLDWP and government roads among others.
“Domestic demand continues to be suppressed with growth outcomes undershooting expectations. External demand conditions have become less favourable for both mining and textiles industry as the global economy slows down. Growth is expected to be more broad-based in the outer year with all sectors showing buoyant performance.”
The bank said the new projections were also a reflection if its re-assessment of the economy’s prospects in line with developments in some key sectors since the release of June forecasts.
The downward revision of growth in 2019 reflects idiosyncratic shocks to main growth drivers. The low discovery of exceptional diamonds and depressed rough diamond prices through to the third quarter of 2019 restrained the overall mining industry performance.
“The weaker performance coupled with a power shortage-induced production halt throughout October at Liqhobong Mine is expected to significantly affect the industry output in 2019. Thus, the mining industry growth has been marked down by 3.6 percent leading to a downward revision of 1.9 percent in the primary sector.
“The secondary sector has also been revised down by 3.7 percent owing to negative demand shocks to the textiles industry. The rather slow execution of planned construction projects also weighed down on the sector’s growth. The upward revision to 2020 growth reflects part of construction activity initially scheduled for 2019 that is expected to spill over into 2020. It also reflects moderate recovery expected in the mining industry and textiles.”
The bank said despite a pick-up in growth over the medium-term, there were risks which could offset growth gains from the expected construction momentum.