moses d pelaelo : welcome remarks - 2021 media economic briefing welcome remarks by mr moses d pelaelo, governor of the bank of botswana, at the 2020 media economic briefing, gaborone, 29 june 2021. * * * good morning ; it is a pleasure to welcome you, distinguished members of the press to this annual economic briefing, which also serves as the launch and dissemination of the contents of the 2020 bank of botswana annual report. this started with a briefing of his excellency the president and cabinet yesterday. in this regard, the dissemination of the bank ’ s annual report is the primary vehicle for accountability to the nation on the operations and financial performance of the bank of botswana. as we are all aware, the covid - 19 pandemic is still with us with devasting impact on the economy and social welfare. while some advanced economies are at advanced stages of reopening as a result of access to vaccines and successful rollout of vaccination programmes. regrettably, in other parts of the world including in our region and here at home, we have witnessed a resurgence of infections and, consequently, a surge in covid - 19 active cases. in this regard, besides potential adverse impact on economic growth profile and estimates for 2021, i have to acknowledge the challenging effect of covid - 19 on work arrangements, where given the status of the bank as a key national institution and an essential services provider, mainly currency and related security operations as well as domestic and international payments, we had to readjust resource deployment to ensure business continuity and uninterrupted service to the nation, while attending to staff welfare and strict observance of the disease containment protocols. as my colleagues will indicate in their presentations, the bank also made the requisite policy adjustments, that is, monetary and exchange rate policy, financial sector policies and injection of liquidity into the banking system, including working with the banking industry to be fully aligned on the measures designed to address the national economic challenges occasioned by the covid19 pandemic. together with coordinated fiscal and government response measures, these interventions helped with stabilisation and, more significantly, preparing the country ’ s economy for strong, durable and sustainable recovery. in addition to the immediate responses to the shock occasioned by the pandemic, the bank continues to focus on long - term prospects for the economy, that is, inclusive, sustainable growth and transition to high income status as well as attainment of the

capacity development. for botswana, this type of spending tends to be import intensive. therefore, the economic benefits of such public investments are derived in the medium to long term. at the same time, the recent labour force survey results, by statistics botswana, for the third quarter of 2019, indicate an unemployment rate of 20. 7 percent. this reinforces the assessment of below - potential performance of the economy, modest aggregate demand and, consequently, subdued pressures on inflation. distinguished guests, the other component of demand, growth in commercial bank credit, eased marginally from 7. 7 percent in 2018 to 7. 6 percent in 2019, driven by a deceleration in lending to businesses, from 10 percent growth in 2018 to a contraction of 1. 7 percent in 2019. for households, annual credit growth increased from 6. 2 percent in 2018 to 13. 8 percent in 2019, in the context of the increase in public sector wages. likewise, faster growth was recorded for personal loans, while the increase in mortgage loans was smaller in 2019 compared to 2018. overall, the rate of credit growth continued to be supportive of economic activity, with minimal risk to financial stability. global monetary policy implementation in 2019 honourable minister and esteemed guests, monetary policy implementation in 2019 was mixed at the global level, in response to weak economic performance and restrained inflation across countries and regions. it was, however, generally accommodative, with low levels of interest rates and continued liquidity support to the financial sector in some of the major economies. most central banks in the emerging market economies reduced their policy rates, given the need to support economic activity. for example, closer to home, the south african reserve bank reduced the repo rate by 25 basis points to 6. 5 percent in july 2019, and further to 6. 25 percent in january 2020. domestic monetary policy implementation in 2019 for its part, the bank of botswana continues to conduct monetary policy through a forecast - based policy framework, and that informs the response to deviations of inflation from the objective range, in a forward - looking manner. the analysis also involves assessment of divergence of actual output from potential output ( the output gap ), a primary indicator of the direction of future inflation. the forecast incorporates projections of foreign inflation, exchange rates and changes in domestic administered prices and taxes. in addition, the bank evaluates the risks associated with the projected outlook. in determining the appropriate policy response, the inflation forecast is considered alongside indicators of financial stability and economic