Botswana’s economy suffered a major setback in the second quarter of 2025 as output from its diamond sector, the backbone of the country’s revenue, dropped sharply, triggering the steepest contraction since the COVID-19 pandemic.
According to new data released by the Statistics Botswana agency on Friday, the country’s Gross Domestic Product (GDP) fell by 5.3 percent in year-on-year terms between April and June. This marks the biggest quarterly decline since 2020 when global lockdowns disrupted trade and restricted demand for commodities.
The agency explained that the contraction was mainly driven by a steep decline in diamond production, which remains the largest contributor to Botswana’s export earnings and government revenue. Diamond output in carats fell by 43.1 percent during the period under review, reflecting a global slowdown in demand for luxury goods, particularly in key markets like the United States, China and Europe.
“The steep decline reflects the diamond companies’ continued effort to scale down operations amid sluggish global demand,” the statistics office said in its report.
Botswana is one of the world’s leading diamond producers and has long relied on sales from its mines, most of which are run through Debswana, a joint venture between the government and global mining giant De Beers. However, global conditions in 2025 have not been favorable, as high inflation in advanced economies, slowing growth in China, and reduced consumer appetite for expensive jewelry have combined to hit demand for rough diamonds.
The slump comes after the government had earlier projected that diamond exports would recover this year following weaker sales in 2024. Instead, the second quarter results show that the industry is under continued pressure, raising fresh questions about Botswana’s heavy dependence on a single commodity.
Economists warn that unless global demand rebounds, the country could face further economic difficulties. Diamonds account for about two-thirds of Botswana’s foreign exchange earnings and nearly one-third of government revenues. Any prolonged downturn in the sector has immediate consequences for the national budget, public investment, and employment.
In recent years, Botswana has made efforts to diversify its economy by boosting tourism, agriculture, and financial services. But the latest figures highlight the slow pace of diversification and the country’s vulnerability to shocks in the global diamond trade. The tourism industry, another major earner, is still recovering from the pandemic, while agriculture remains vulnerable to climate conditions such as drought.
The International Monetary Fund (IMF) has previously advised Botswana to accelerate structural reforms, broaden its tax base, and reduce its fiscal dependence on diamonds. The sharp drop in GDP during the second quarter may now give fresh urgency to those recommendations.
In the political space, the economic contraction could also add pressure on President Mokgweetsi Masisi’s government, which is facing public concerns over unemployment, rising cost of living, and limited job opportunities for the youth. Botswana has long been praised for prudent financial management and political stability, but citizens have increasingly called for more concrete action to build an economy that is not overly reliant on diamonds.
Industry insiders say the diamond slump may also affect negotiations between the government and De Beers, as both sides had previously reached a new sales agreement to boost Botswana’s share of rough diamond marketing. Analysts note that reduced production and demand could complicate implementation of that deal.
Looking ahead, much will depend on how quickly global markets recover. If demand for luxury items strengthens in late 2025 or 2026, Botswana could see a rebound in diamond sales. However, if the slowdown persists, the country may face further budget deficits, forcing it to borrow more or cut spending on public projects.
For now, the latest GDP figures serve as a reminder that while diamonds have long been Botswana’s strength, they also represent a major weakness when global demand falters. The challenge for the government remains how to cushion the economy from such shocks while building sustainable growth in other sectors.
