Kananelo Boloetse
The domestic economy is estimated to have expanded by a revised 1.4 percent in 2023, up from 1.1 percent in 2022, according to the Central Bank of Lesotho (CBL)’s Lesotho Economic Outlook 2024-2026 Update.
The growth was driven by the services sector and the construction industry.
“The estimate for 2023 is 0.4 percentage points lower than projected in the December 2023 Lesotho Economic Outlook (LEO),” the report stated.
This downgrade reflects significantly lower textile and clothing output due to a continued drop in orders from the United States of America (USA) market.
Additionally, the construction industry projection was revised down by 2.4 percentage points following an implementation schedule update. These downward revisions outweighed the upward revisions in the mining industry.
According to the CBL, the primary sector is estimated to have recovered by 6.1 percent in 2023 from a contraction of 0.9 percent in 2022. This recovery was supported by unexpectedly strong growth in the mining industry and a rebound in crop production.
Despite the global downturn in the diamond mining industry in 2023, mining output is estimated to have increased by 11.1 percent. The higher-than-expected growth was due to mining companies adhering to production targets, resulting in large stocks of unsold diamonds.
Additionally, the reopening of the Liqhobong Mine boosted mining industry output.
“Agricultural production is estimated to have grown by 3.4 percent in 2023, supported by the timely onset of rains for the 2023 cropping season. However, the high cost of farming inputs undermined crop production,” the report added.
Meanwhile, the secondary sector is estimated to have contracted by 8.2 percent in 2023 due to poor performance in the textile and clothing sub-sector, which experienced low orders from the US market.
The tertiary sector, the main contributor to growth in 2023, is estimated to have grown by 2.5 percent, supported by public administration and support services related to ongoing construction projects.
Looking ahead, the domestic economy is projected to grow by an unchanged 3.0 percent in 2024 but slow down to 2.0 percent in 2025 and 1.2 percent in 2026.
“The projected growth is driven by the services sector and construction activity as the Lesotho Highlands Water Project (LHWP) Phase II reaches its peak in 2024 to 2025. The service sector is expected to benefit from knock-on effects as it supports ongoing construction projects and later receives a boost from MCC Compact II implementation activities.”
The agricultural industry is expected to pick up in 2025 following underperformance in 2023 due to the onset of El Niño. In the outer year, growth slowdown is explained by the winding down of activities within the LHWP II as the project enters its final stages.