Global GDP growth of 4.1% in both 2011 and 2012 will raise demand for Botswana's exports over the forecast period. Prices are expected to remain buoyant and production by Botswana mines will steadily build up to full capacity by 2012. A small new diamond mine has recently started production and others are expected to follow, including a major new investment in the Central Kalahari Game Reserve. A new copper development is under way, with more expected to follow, and investment in the country's first uranium mines is also expected. Coal-mining projects are increasingly attracting investor interest, particularly from India, as world coal prices continue to rise, and the development of associated infrastructure, including rail links, is expected to start during 2012. However, growth from mining sources will be partly offset by the slowdown in government capital spending and from the erosion of civil servants' purchasing power through continued wage freezes.

The BoB has reported that local businesses are increasingly positive about business conditions and expect manufacturing to recover more of the ground that it lost in 2009, as global demand remains strong. We forecast GDP growth of 6.3% in 2011 and 6% in 2012 as the effects of the recovery fade. The key risk to the growth outlook for Botswana is falling international demand in the diamond sector, which will be crucial for financing public and private consumption and investment. Fuel shortages towards the end of 2010 and reduced electricity supply from Eskom, the South African power utility, from January also underline continuing supply-side vulnerabilities; the diversification of energy sources will remain a priority and may test the government's commitment to reducing capital spending.