Botswana's real GDP growth slowed to 2.5% y/y in the second quarter from a downwardly revised 3.8% in the preceding quarter, posting its lowest growth since Q3 2011, data from the Central Statistics Office (CSO) showed. On a seasonally adjusted quarterly comparison basis, the diamond producing country’s economy contracted 0.4% in Q2 after a 1.8% decline in Q1.

At industry level, the economy’s single biggest sector, mining, which contributed 22.4% to GDP, contracted 8.0% y/y in Q2, reversing a 1.2% y/y growth in Q1. The significant decline was driven by a 5.7% drop in diamond production amid falling diamond prices due to weakening demand by China.

In contrast to tightening monetary policy moves across sub-Saharan Africa, Botswana’s central bank has cut its benchmark interest rate by 150bp since the beginning of this year, to 6.0% currently, in a bid to support economic activity, which is highly dependent on diamond mining and exports. This has probably contributed to improvements in other key sectors.

Botswana’s second biggest sector, trade, hotels and restaurants with a 15.3% share, grew 6.9% y/y, accelerating from a 6.4% y/y rise in Q1. Finance and business services (12.7% share) increased 5.8% y/y, speeding from a 4.0% growth in Q1.

Total final consumption expenditure grew 3.3% y/y in Q2, accelerating from a 1.3% y/y growth in Q1. Household consumption rose 2.4% y/y and government consumption increased 5.7% y/y.

At the same time, growth in gross fixed capital formation quickened to 8.2% from 0.7%, driven by increase on machinery and equipment and construction expenditures by 12.8% and 6%, respectively.

Exports of goods and services shrank 4.3% y/y, while imports rose 6.3% y/y.

Earlier this month, the International Monetary Fund (IMF) cut its 2015 growth outlook for Botswana to 2.6% from 4.4% forecast in April. The fund expects the country’s GDP growth to rebound to 3.2% next year.