IMF PROJECTS ECONOMIC GROWTH FOR SUB-SAHARAN AFRICA

MBABANE – The International Monetary Fund’s (IMF) latest World Economic Outlook (WEO) for January 2025, forecasts a positive trajectory for Sub-Saharan Africa, including Eswatini, despite global economic uncertainties. According to the IMF, economic growth across the region is expected to pick up, driven by a rebound in trade, ongoing policy adjustments and improved economic management. For Eswatini, this is welcome news, as the economy has shown resilience amid challenges such as inflationary pressures and fiscal constraints. The IMF further notes that world trade volumes for 2025 and 2026 have been slightly revised downward due to heightened trade policy uncertainty. However, this is unlikely to significantly dampen growth in Sub-Saharan Africa, where trade ties with key markets remain strong. For Eswatini, exports of sugar and textiles are expected to benefit from stable demand in regional and global markets. The IMF emphasises the importance for Eswatini to adopt trade-friendly policies to navigate these uncertainties.

Policy

The Central Bank of Eswatini’s (CBE) monetary policy, which has kept inflation in check, is highlighted as critical in maintaining price stability. Inflation in Eswatini is expected to moderate in 2025, in line with the IMF’s forecast of a decline in energy prices globally. As of October, 2024, the CBE forecasts that inflation in 2025 will be 4.9 per cent. This is a downward revision from previous forecasts. 

Forecast

The CBE’s forecast is based on the expectation that food inflation, oil prices and South African inflation will moderate. On the fiscal front, the IMF underscores the need for Eswatini to continue its efforts in reducing public debt and addressing fiscal deficits. The recent boost in Southern African Customs Union (SACU) revenues offers a unique opportunity to consolidate fiscal policy without compromising growth. The IMF warns of downside risks, including geopolitical tensions and disruptions in trade routes, which could raise food and energy prices. For Eswatini, such risks underscore the need to strengthen agricultural productivity and diversify the economy. However, the report also highlights opportunities. If Eswatini can leverage its position within SACU and embrace structural reforms, it could achieve sustainable growth. Enhancing labour market participation and investing in digitalisation and education could significantly improve productivity. To align with IMF recommendations, Eswatini needs to adopt growth-friendly policies, ensure fiscal sustainability and mitigate the impact of economic adjustments on vulnerable populations. Transparent governance and regional co-operation within SACU are also key to bolstering economic resilience.

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