Botswana consumer spending set to decline by P1.3 Billion in 2026

New data from Business Monitor International (BMI), a global research firm, forecasts a notable contraction in consumer spending in Botswana this year. The report projects a reduction of P1.3 billion in household expenditures for 2026, driven by mounting economic challenges that are expected to erode purchasing power across the country.

According to the updated August projections, total household spending in Botswana is anticipated to fall by 1.0 percent, from P132.5 billion in 2025 to P131.2 billion in 2026. A modest recovery of 1.3 percent is expected in 2027. The forecasted dip in 2026 is attributed to a confluence of factors including a sluggish economy, persistent unemployment, renewed inflationary pressures, and tighter credit conditions for consumers.

BMI estimates real Gross Domestic Product (GDP) growth to reach a modest 1.7 percent in 2026. The firm links this subdued growth to ongoing global headwinds affecting the diamond industry, compounded by geopolitical tensions stemming from the US-Iran conflict. The GDP growth outlook remains restrained into 2027, with a projected increase of just 1.5 percent.

Unemployment is poised to remain a significant drag on consumer spending. The research firm projects the unemployment rate to average 24.4 percent in both 2026 and 2027, a slight improvement from 24.5 percent in 2025 but still markedly above the pre-pandemic average of 21.6 percent recorded between 2015 and 2019. BMI highlights that these persistently high levels of unemployment will continue to pressure household budgets, forcing consumers to focus primarily on essential spending. “A weak economic backdrop and structurally high unemployment will weigh heavily on consumer spending,” the report states.

Inflationary pressures present another challenge. Although headline inflation eased from 10.7 percent in June 2026 to 9.4 percent in July, core inflation accelerated from 5.8 percent to 6.3 percent over the same period. BMI warns that inflation is set to intensify in 2026, with prices driven higher by rising fuel and food import costs. The firm forecasts inflation climbing from 2.6 percent in 2025 to 7.6 percent in 2026, further eroding consumer purchasing power. As a result, household incomes are expected to remain under strain through 2027, with little relief in sight.

These inflation dynamics may prompt the Bank of Botswana to tighten monetary policy. BMI anticipates a 100 basis-point increase in the policy rate over 2026, pushing it to 6.5 percent. Higher borrowing costs will likely deter new consumer credit and increase the burden on households with existing debt, further constraining spending. “Inflation and rising borrowing costs are expected to dampen consumption, particularly through credit channels, as consumers become more cautious,” the report notes.

The diamond sector’s ongoing struggles are also hitting middle-income households tied to mining and related industries. Meanwhile, rural communities face persistent economic and infrastructural challenges. Although government initiatives aim to diversify the economy through tourism, financial services, and manufacturing, BMI cautions that these efforts will take time to translate into meaningful improvements in household incomes and spending.

Fiscal constraints, including limited public sector job creation and stagnant wage growth, are additional hurdles weighing on consumer purchasing power. These combined factors paint a cautious picture for Botswana’s consumer market in the near term, as economic pressures continue to mount.

The coming years will test the resilience of Botswana’s households as they navigate a challenging economic environment marked by inflation, unemployment, and slow growth.

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