The outlook for the Eswatini economy is positive in the near term but some of the Kingdom's vulnerabilities remain and could constrain economic growth. Therefore, the IMF believes that measures are needed to strengthen growth. 

The IMF expects Eswatini's economic growth to reach 3.2% and its inflation to stabilize this year. According to an end-of-mission release published by the multilateral institution today, the growth will be supported by agricultural production, manufacturing, and increased government spending. Compared to 2022, this forecast represents an increase of 2.8 points. Indeed, GDP growth stagnated in 2022 at 0.4 percent, mainly due to "the continued dampening effect from civil unrest, government payment arrears, slowing growth in South Africa, and heavier than normal rainfall and industrial action on the sugar sector."

Inflation is expected to stabilize at around 5 percent after reaching 5.6 percent in 2022, due to rising food and transport prices. While increased government spending and lower Southern African Customs Union (SACU) revenues are expected to widen the government's budget deficit to 5.4 percent of GDP at the end of FY2022-2023, the deficit is expected to narrow in the next fiscal year (2023-2024).

“SACU revenue transfers are expected to roughly double in FY23-24, facilitating a significant reduction in the fiscal deficit and a modest reduction in the ratio of public debt to GDP,”  the release informs. 

Despite "considerable progress," the Fund says Eswatini's macroeconomic and fiscal imbalances remain a source of vulnerability for the Kingdom. The risks of debt distress, rising domestic arrears, and declining foreign exchange reserves make the country vulnerable to further shocks.

To improve the economy's resilience to these vulnerabilities, the Fund recommends the implementation of several measures. Among other things, the authorities are encouraged to continue their adjustment program to ensure fiscal sustainability and rebuild external buffers. Promoting private investment and strengthening competitiveness will be key to boosting growth and reducing unemployment, the IMF believes.

Jean-Marc Gogbeu