Eswatini: Economic Outline

Economic Indicators

In April 2018, 50 years after independence from British rule, King Mswati III changed the country’s name from Swaziland to the Kingdom of Eswatini, its pre-colonial original name. As a landlocked territory surrounded by South Africa and Mozambique, Eswatini’s economy relies largely on South Africa and on the volatile and declining Southern Africa Customs Union (SACU) revenue. Over the last two decades, Eswatini's GDP per capita growth has averaged only 1.8%. The country's economic growth was already slowing when it entered recession in 2020 due to the outbreak of the Covid-19 pandemic. Real GDP rebounded to 4.8% in 2023, driven by services and exports, with increased SACU receipts aiding in reducing the fiscal deficit while boosting government-linked services. Agriculture contracted by 2.5% due to weather-related challenges. The medium-term outlook is moderately favorable, with GDP growth stabilizing at around 3% from 2024 to 2026, supported by higher investments and improvements in industry and services. However, climate change poses a risk to the agricultural sector and the vulnerable population (data World Bank).

The fiscal deficit improved from 5% of GDP in 2022 to 2.1% in 2023, yet expenditure arrears rose again. SACU receipts more than doubled in 2023, boosting revenue, but spending increased due to a higher public sector wage bill, interest payments, and election-related expenses. Despite a decline in public debt between 2022 and 2023, arrears increased due to weak commitment controls, reaching an estimated 2.0% of GDP in February 2024. Although a SACU Revenue Stabilization Fund was established in 2023, it remains undercapitalized as expenditure pressures continued. Looking ahead, SACU revenues are projected to rise by 11.5% in 2024, aiding in reducing the fiscal deficit and clearing accumulated expenditure arrears. Annual average inflation rose from 4.8% in 2022 to 5.0% in 2023 despite global inflationary pressures easing. This increase was driven partly by higher transport and food prices. Early 2024 saw continued pressure, with inflation climbing from 4.3% in December 2023 to 4.5% in January 2024 (year-on-year). However, inflation remained within the 3-6% band, with the central bank keeping the repo rate at 7.5% since July 2023. Inflation is expected to ease slightly to 4.9% in 2024, aligning with global trends, but elevated crude oil prices, a weaker exchange rate, and higher food prices could pose challenges to this projection. The country's sluggish growth rate can be partly attributed to deteriorating public finances, marked by increasing public debt, the accumulation of domestic expenditure arrears, and inefficiencies in public spending. Additionally, structural weaknesses have impeded the growth of the private sector. These include a challenging investment climate due to burdensome regulations, distortions caused by inefficient state-owned enterprises, and limited access to regional and international markets. Eswatini is seeking a comprehensive industrial policy to support diversification, develop local entrepreneurs (the government has implemented initiatives to develop and promote indigenous entrepreneurship, particularly in small and medium enterprises), and promote industrialization across the country. Nevertheless, the presence of potential risks remains, including unpredictable shifts in international commodity prices, more stringent global financial conditions, climate vulnerability (drought), lack of technological readiness, and a deceleration in South African economic expansion.

The percentage of the population living below the USD 3.65/day (2017 PPP) poverty line decreased from 76.4% to 58.1% between 2000 and 2016. However, as of 2024, poverty remains high at 52%. Income inequality is high and unemployment concerned 22.2% of the population in 2023 (World Bank modelled ILO estimate). The country’s GDP per capita (PPP) stood at USD 10,699 in 2022 (World Bank). Poverty, measured by the lower-middle-income country poverty line, is forecasted to decrease from 52% in 2024 to 51.3% in 2025. Despite anticipated economic recovery benefiting households, challenges such as reduced agricultural output and structural issues, including limited job opportunities and access to services, will hinder significant improvement for the poor.

Monetary Indicators	2016	2017	2018	2019	2020
Swaziland Lilangeni (SZL) - Average Annual Exchange Rate For 1 GHS	3.69	3.06	2.89	2.83	2.95

Source: World Bank - Latest available data.

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Latest Update: May 2024