Economy

MBABANE – Eswatini must brace itself for increased inflation caused by geopolitical developments, including the demand for oil.

This is despite the current moderation in inflation forecasts.

According to the First Quarter Report of the Ministry of Economic Planning and Development, prices continued to increase at a slower rate in the first quarter of 2026, with headline inflation averaging 1.9 per cent, down from 2.6 per cent in the fourth quarter of 2025. The major contributors to this disinflation were ‘housing and utilities’ as well as transport inflation, which declined by 0.2 percentage points and 0.8 percentage points, respectively.

The report states that ‘Housing and utilities’ inflation eased from an average of 4.3 per cent in 2025 (fourth quarter) to 4.0 per cent in the period under review, on account of a fall in the inflation rate of the ‘electricity, gas and other fuels’ category. In the same vein, transport inflation moderated from an average of 0.8 per cent in 2025 (fourth quarter) to 0.04 per cent in 2026Q1.

“This was mainly attributable to a slowdown in the inflation rate for ‘motor vehicles as well as fuel and lubricants for personal transport equipment’. Inflation is expected to decline gradually, but risks remain significant. Geopolitical tensions could reignite commodity price spikes, which would eventually be transmitted to transport costs.”

The report states that climate shocks such as droughts may push food inflation higher. Coupled with transport costs, draught caused food inflation to reach alarming levels.

“Exchange rate volatility is another channel through which commodity prices manifest and remains a key uncertainty.”

It states that a decrease in pressures across both goods and services supported the ongoing moderation in inflation.

During the review period, inflation for goods dropped from an average of 2.7 per cent in the fourth quarter of 2025 to 2.0 per cent in the first quarter of 2026. A 1.1-percentage-point decrease in durable goods, such as furniture, largely drove this decline. Non-durable goods, including food and beverages, also saw a reduction of 0.8 percentage points, while semi-durable goods like clothing fell by 0.5 percentage points.

Meanwhile, services inflation followed a similar trajectory, decreasing by 0.4 percentage points. This reduction can be partly attributed to a moderation in inflation rates for various services, including health, recreation and culture, education and miscellaneous goods and services.

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