Times Of Swaziland: ‘ECONOMIC GROWTH MIGHT BE LESS THAN 1%’

‘ECONOMIC GROWTH MIGHT BE LESS THAN 1%’
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BY ASHMOND NZIMA  on 15/04/2020 00:58:00


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.