Lesotho’s economic outlook is expected to lag behind world and African averages, according to Standard Bank economist Jan Duvenage’s mid-year gauge of the country’s economy.
International Monetary Fund forecasts expect the economy to grow by 2,4% this year and 3% in 2006, compared with African averages of 5% and 5,4% for the same years.
Duvenage says growth constraints include food insecurity, soil degradation, lower agricultural efficiency and a high HIV/Aids infection rate.
Present growth has been sustained by clothing and textile manufacturing exports through the United States African Growth and Opportunity Act (Agoa). The US is Lesotho’s largest export destination.
However, “growth declined noticeably in the second half of 2004 because of the negative impact of uncertainties in the textile industry”, according to Duvenage.
Manufacturing accounts for 21% of gross domestic product.
Duvenage reports that the country’s trade balance was boosted by its export performance under Agoa, with the export of textiles and apparel under the Act amounting to $456-million in 2004.
This growth in exports has created an estimated 28Â 000 jobs in the sector, according to the Standard Bank report.
The Lesotho loti is pegged at par with the South African rand, and weakened against the dollar during April into June, the report says. The May average exchange rate was 6,74 loti per dollar.
The report says Lesotho’s inflation rate is expected to average 5% in 2005. It notes that as Lesotho sources most of its imports from South Africa, relatively low inflation in that country will help contain price pressure.
No further interest-rate changes are expected over the next few months in Lesotho, the report concludes. — I-Net Bridge