FAVOURABLE ECONOMIC PROSPECTS FOR ESWATINI

MBABANE – The World Bank says the country’s economy performed well during the first half of 2024, supported by domestic and foreign demand.

According to the World Bank’s economic overview for Eswatini updated early this month, the sustained increase in Southern African Customs Union (SACU) revenues boosted domestic demand and lifted growth in the service sector.

Product

The growth was broad based with merchandise exports increasing by 14 per cent over the past 12 months.  Real gross domestic product (GDP) growth is projected to remain strong at 4.6 per cent in 2024 (from 4.8 per cent in 2023). Inflationary pressures eased in the first eight months of 2024, partly due to the easing of global inflation drivers. Annual inflation averaged 4.2 per cent during this period compared to 5.3 per cent during the same period in 2023. The Central Bank of Eswatini (CBE) has maintained the repo rate at 7.5 per cent from July 2023 until September 2024 – aligning its monetary policy stance with South Africa, but 75 basis points lower. It was then lowered to 7.25 per cent.

The fiscal situation has improved driven by high SACU revenues, yet high public expenditure arrears still require urgent resolution. The fiscal deficit is estimated to have declined to 2 per cent of GDP in 2023 (from 6.5 per cent in 2022), as SACU revenues more than doubled. Recently, the Minister of Finance Neal Rijkenberg, indicated that the problem with the high deficit was that it meant the  country was taking a lot of debts to keep up with its expenditure. He said unfortunately the debt-to-GDP ratio in the past 10 years or so was around 20 per cent to GDP and now hovering at around 36 per cent.

Notwithstanding the surge in revenues, expenditure arrears increased from 4.9 per cent at the end of 2023 to over 5.0 per cent of GDP in July 2024, reflecting deficiencies in cash management and commitment controls. Public debt declined to below 40 per cent of GDP and the government deposited E750 million into the Revenue Stabilization Fund during the first half of 2024.

Survey

The World Bank noted that despite some progress, Eswatini’s social indicators are lagging behind those of other lower middle-income countries. The most recent labour force survey placed unemployment at 33.3 per cent in 2021 (from 23 per cent in 2016), the highest rate on record in over a decade. Over 50 per cent of the population continues to live below the US$3.65/day (2017 PPP) lower middle-income country poverty line. Eswatini has high and persistent inequality with a Gini index of 54.6 per cent in 2016- among the highest in the world.

Poverty persists, in part, because of the lack of quality jobs. According to the Integrated Labour Force Survey, labour force participation among the working-age population fell from 50.6 per cent in 2016 to 45.9 per cent in 2021.  Eswatini’s economic prospects remain favourable. Rising external demand is expected to drive manufacturing and other exports. High SACU revenues in 2024 are projected to ease fiscal and external pressures, but the situation is complicated by financing challenges and associated expenditure arrears. The fiscal deficit is projected to remain at 2 per cent of GDP in 2024, on account of higher SACU revenues. Public debt is projected to remain below 40 per cent of GDP. In the medium-term fiscal deficit may increase due to declining SACU revenue.

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