MBABANE – The country’s economic outlook over the medium term offers cautious optimism, but also a clear warning.
According to renowned Economist and University of Eswatini Lecturer, Sanele Sibiya, the economy is projected to grow by 5.0 per cent in 2025, before moderating to 3.8 per cent in 2026 and easing further to 2.9 per cent by 2027.
While these figures mark an improvement on the country’s long-term average growth of about 2.3 per cent between 2015 and 2024, Sibiya said they remain insufficient to fundamentally alter the country’s high levels of unemployment, poverty and inequality.
“The central challenge is not whether the country’s economy is growing, but how it is growing. Current growth is largely cyclical, driven by consumption, public investment and services expansion. Without deliberate structural change, this momentum risks fading, leaving the economy trapped in a familiar pattern of stagnation, limited job creation and persistent social pressure,” he said.
Current drivers of growth
The primary engine of the country’s recent growth rebound is household consumption, as revealed by Sibiya. Lower inflation, which averaged 3.5 per cent in 2025, combined with accommodative monetary policy and government transfers, has supported consumer spending.
Sibiya revealed that private consumption growth is estimated at nearly 6 per cent in 2025, boosting wholesale and retail trade and related services.
While this has helped stabilise economic activity, he said consumption-led growth is inherently fragile. He revealed that it depends on incomes that are not rising fast enough and employment that is not expanding broadly.
A second important driver is public investment, particularly in infrastructure, as reflected by the economist. He stated that gross fixed capital formation grew by over 9 per cent in 2025, supported by projects in energy, water and roads.
Construction
These investments have stimulated construction activity and services while easing some supply-side constraints.
However, this boost is temporary. As fiscal pressures mount, driven by declining SACU revenues, rising recurrent expenditure (including burgeoning public sector wage bill), and growing public debt, the scope for sustained investment-led growth narrows,” he said.
He also revealed that the services sector has been a key stabiliser. He said financial services, internal trade and construction-related services have expanded, supporting overall growth. Services growth reached about 4.2 per cent in 2025, though it is projected to slow to around 2 per cent over the medium term.
“Importantly, service expansion has not translated into sufficient employment, especially for young people,” he said.
On the production side, Sibiya shared that industry and manufacturing have shown tentative recovery, with industrial growth projected at 4.5 per cent in 2025 and strengthening in 2026, yet this recovery remains uneven and vulnerable.
He said manufacturing contracted earlier in 2025, highlighting ongoing competitiveness challenges, high input costs and exposure to external demand conditions.
“Externally, exports are growing, but imports, especially capital goods are growing faster, pushing the current account back into deficit. This underscores the import-intensive nature of the country’s growth and the limited capacity of exports to anchor long-term expansion,” he said.
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Youth empowerment: From policy rhetoric to economic strategy
MBABANE – Sibiya said no discussion of the kingdom’s growth constraints is complete without addressing youth empowerment.
With more than half of young people unemployed, he said youth exclusion is not only a social challenge, it is a binding economic constraint.
An economy that fails to productively absorb its youth cannot sustain growth, fiscal stability or social cohesion.
He mentioned that in this context, the E500 million Youth Empowerment Loan Bill represents a significant opportunity, but also a significant risk.
“If poorly designed, it could become another expensive programme with limited impact. If well structured, it could catalyse entrepreneurship, job creation and long-term growth,” he said.
How to make the E500 million youth loan work for the country
First, the facility must be clearly investment-focused, not consumption-oriented, as detailed by the economist. He said loans should prioritise productive sectors, agro-processing, manufacturing, services, digital enterprises and green economy activities rather than trading or speculative activities with limited spillovers.
Second, Sibiya said finance must be paired with business development support. He said access to credit alone is insufficient. He also mentioned that young entrepreneurs need mentorship, financial literacy, market access and technical assistance. He said a portion of the E500 million should be earmarked for incubation, coaching and monitoring.
Third, the scheme should adopt blended finance and risk-sharing mechanisms.
Partial guarantees, co-financing with commercial banks and performance-based incentives can crowd in private capital while reducing default risk.,” he said.
Fourth, governance and transparency are critical as revealed by the economist. Clear eligibility criteria, independent oversight and public reporting are essential to prevent politicisation and ensure credibility, as stated by Sibiya.
Finally, Sibiya said youth empowerment must be linked to job creation outcomes, not just loan disbursement. He said success should be measured in businesses sustained, jobs created and value added not simply funds allocated.
*Full article available in our publication
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