SIGNS OF ECONOMIC REBOUND AS SECTORS PROJECTED TO GROW IN 2024

MBABANE – Despite intensifying geopolitical tensions and financial stresses, the picture is starting to look much better if the projections by the Ministry of Economic Planning and Development in collaboration with the Central Bank of Eswatini were anything to go by.

The recent economic performance statement by the Minister of Economic Planning and Development Dr Tambo Gina indicates that the Eswatini Gross Domestic Product (GDP) is estimated to have expanded by 4.8 per cent in 2023, reflecting a slight upward revision from the previous projection of 4.7 per cent (in September 2023). The increase is accounted for by a strong performance from the tertiary sector, which counteracted a slowdown in the secondary sector and a poor performance in the primary sector.

The primary sector, which comprises of ‘agriculture & forestry’ and ‘mining & quarrying’ activities is projected to strongly rebound to 6.3 per cent in 2024, in consideration of low-base effects from the previous year, a recovery in the sugar industry considering additional sugarcane production from the Lower Usuthu Smallholder Irrigation Project (LUSIP) II, and sustained growth earmarked for the mining and quarrying subsector.

Discouraged

However, the uncertainty over the well-publicised El Niño phenomenon discouraged some farmers from planting, particularly maize farmers. Notably, tractor planting hours depicted a decline of more than 30 per cent in the 2023/24 planting season, which will result in lower maize output in 2024. Conditional on favourable weather conditions and continuous implementation of planned projects such as LUSIP II and MNWAP, the primary sector is projected to average 2.1 per cent in the medium term (i.e. 2025 and 2026). The secondary sector, which comprises of manufacturing, electricity and water supply and construction activities is projected to grow by 5.8 per cent, in line with previous projections. This will be supported by growth in the manufacturing activities, envisaged to record 3.8 per cent in 2024 at the back of anticipated rebound in the sugar industry.

Additionally, construction activity is expected to increase by 32.8 per cent (unchanged from previous projections), benefiting from earmarked implementation of mega projects.
The further improvement in SACU inflows for 2024/25 fiscal is expected to ease some cashflow challenges and fast-track the implementation of ongoing capital infrastructure projects, thereby supporting growth in the construction and related subsectors. In the medium term, the secondary sector is projected to average 3.7 per cent from a previous average of 2.7 per cent indicating a much-improved outlook for the manufacturing and construction subsectors.    

Composed

Meanwhile, the tertiary sector which is composed of all services such as ‘wholesale & retail’, ‘transport’, ‘information communication and technology’ (ICT), ‘financial services’, ‘tourism activities’, ‘government services’ and other services, is projected to grow by 4 per cent mainly supported by ICT, ‘transport and storage’, ‘professional services’, and ‘tourism activities’ subsectors. The ICT subsector is expected to continue its infrastructural investment i.e, introduction of wireless ICT-technology, fibre network and the potential rollout of 5G network. However, the tourism-related activities are expected to remain on a recovery path and reach pre-COVID-19 levels within the medium term.

Developments in the primary and secondary sectors earmarked for the medium term are expected to support growth in other services such as ‘transport and storage’, ‘wholesale and retail’, ‘professional services’, and ‘financial services’ among others, thereby supporting growth for the tertiary sector at large. The average growth for the tertiary sector in the medium term is 3.3 per cent

.… uncertainties in SA pose threat to Eswatini economy.

 While the medium-term outlook is broadly positive, risks remain imminent in the short-to-medium term. Challenges relating to climate change resulting in erratic weather conditions could pose a threat to sectors such as agriculture, agro-processing, hydro-power generation and water supply, among others. Unforeseen delays in the implementation of mainly mega public sector projects will likely dampen anticipated demand linked with construction activity – affecting sectors like ‘mining and quarrying’ and ‘construction’, among others.

The uncertainty in the Republic of South Africa (RSA) around energy, infrastructure, and election outcomes will pose a threat to the Eswatini economy in the short-term, potentially through disruptions in production, trade and exchange rate movements of the Rand, which is pegged to the Lilangeni. Globally, prolonged and intensifying geopolitical tensions continue to cause global value chain disruptions, which affect commodity prices and currency markets. The global developments tend to curtail external demand, which weigh negatively on export growth and disrupt input supply to productive sectors, thereby affecting domestic output.

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