FOOD INFLATION EXPECTED TO REMAIN LOW

MBABANE – While there are inflationary pressures coming mainly from higher crude oil prices and a weaker exchange rate, the overall domestic food inflation outlook outweighs the upward pressures.

The Central Bank of Eswatini (CBE) has forecasted that in the near term, food inflation is expected to remain low with a gradual increase expected later in the year.
However, global oil prices are expected to remain elevated, especially in the short-term, primarily due to the ongoing geopolitical risks and production cuts.
The Lilangeni exchange rate remains at a weaker position with a more pronounced depreciation in the short-term. In its revised inflation forecasts, the CBE stated that amid the high inflationary pressures, the inflation forecast for the short-to medium has been revised downwards.

Overall inflation outturn for April 2024 was lower than anticipated, thus lowering the trajectory of the inflation outlook. Downside pressures to the short-term inflation outlook are expected to come mainly from the lower South African inflation outlook, which remains muted when compared to the previous period.
The lower inflation in South Africa which mainly transmit via import of finished goods is, therefore, expected to influence overall Eswatini inflation to the downside.
The second and third quarters of 2024 are revised down to 4.20 per cent (from 4.81 per cent) and to 4.78 per cent (from 5.49 per cent) respectively.

Tarriffs

The upward trend in the third quarter, although revised downwards is due to an expected increase in administered prices, particularly water tariffs. The fourth quarter is slightly revised down to 4.75 per cent (from 4.84 per cent). Consequently, the annual average inflation forecast for 2024 is revised down to 4.50 per cent (4.91 per cent). While risks to inflation remain high, the medium-term forecasts for inflation have been revised downwards. In the medium term, oil prices are expected to moderate gradually coupled with an appreciation in the exchange rate. The expected moderation in oil price and slight appreciation in the Rand are expected to pose as downside pressure on domestic inflation.

Further, food inflation is expected to pick up but remains low. The forecast for 2025 is thus revised down to 5.13 per cent (from 5.21 per cent), while 2026 is revised down to 4.92 per cent (from 5.37 per cent). It is worth noting that in 2023, food and energy inflation remained sticky in the domestic economy, much against global developments, and together with price increases in housing and utilities, remained the key drivers for inflation in the period.
On the positive, however, transport inflation decelerated.

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