‘ECONOMIC GROWTH MIGHT BE LESS THAN 1%’

MBABANE – As the coronavirus continues to cause havoc globally, an expert has slashed the country’s expected economic growth to less than a per cent.

Dr George H. Choongwa, who is Southern Africa Research Foundation for Economic Development (SARFED) Regional Coordinator, said developing countries like Eswatini were likely to lose growth momentum with more than 50 per cent.

This means that the country’s economy would no longer be growing to its projected 2.5 per cent this year.
“If not well managed, this growth trend might slide to less than one per cent. The reasoning to this concept is based on the reduced economic activities at both micro and macro level,” said Choongwa. 

Choongwa stressed that industries like transport, hospitality, retail, as well as banking were faced with fast down turn in business. 
“The reason for this trend is based on the concept that since the virus was highly transmission based, it would mean that all industrial sectors reliant on trade and the free movement of people remain highly challenged as they were most exposed.

“Sectors that remain challenged during the COVID-19 pandemic include the manufacturing, hospitality, transport, and retailing sector as they remain to be actively influenced by the dynamics on both the supply and demand side of any economic performance,” he said

disruption

From the supply point of view, Choongwa said production was affected by the reduction in labour supply due to the number of infected workers, which reduces the number of people available to work, and because of the disruption of the value chains on the other hand.
“Disruption is likely to badly hit those firms that rely on devices and components from other firms, like construction industry, where the inputs are always sourced from somewhere else in a chain.

“The demand for manufactured goods could reduce as a consequence of the pandemic. This usually occurs for two reasons.
‘‘The propensity to consume decreases as workers, who are required to stay at home in support of social distancing measures, tend to prioritise saving over spending.

“Secondly, firms that are experiencing disruptions in the production process may decrease their consumption of intermediate goods due to shortages in the entire supply chain system, especially those firms that were trading across the border.
‘‘Pegged countries like Eswatini will experience a drop in the production of transformed manufactured goods significantly over a sustained period of time,” he said.

The informal sector, according to Choongwa, remains the most hit in this situation, as nothing or very little has been put in place by government to address this situation.

“With the country’s high level of unemployment, taking the decision of lockdown potentially plunges informal sector labour force into a worsening situation as most of these traders are only survivalists who depend on their daily income for survival,” he said.

Choongwa said the intervention of further loss of economic viability could be considered from both governmental and non-governmental perspective on the basis these were the two arms of economic performance in any circumstance. 

frustrate

“From the perspective of governmental interventions, there should be a balance that will not frustrate the entire government machinery. Collection of government revenue must continue so that the coffers could not completely run out.  As long as there were strict measures of health precaution in place, government could find means of maintaining the collection of revenue.

‘‘The fiscal situation of the country must remain afloat. It would be a big challenge for the country to have no revenue in the midst of the pandemic,” he said.
Another response suggested by Choongwa is the extension of long trading hours beyond 5pm in order to help traders maximise their revenue.
“The fact that government has limited the number of customers trading in either a shop or using public transport, the level of reaching a point of profit would not be possible.

‘‘If the number of trading hours increased, it would give the traders some extra time to make some profits,” he said.
Regarding long-term interventions, Choongwa said government should remain proactive in the intervention of the devastating effect of COVID-19 in both the short and long-run.

“The fact that due to its nature as a novel or new virus, other implications might manifest in both short and long-term basis which if not well-managed might even worsen the economic growth trends of the country,” said Choongwa.

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