Eswatini: Economic Outline

Economic Indicators

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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. The country's economic growth was already slowing when it entered recession in 2020 due to the outbreak of the Covid-19 pandemic. After contracting by -2.4% in 2020, economic growth recovered modestly to 1.5% in 2021, and is expected to slightly increase to 1.7% in 2022 and 1.8% in 2023 (IMF). In the medium term, growth is expected to be limited by accelerated fiscal consolidation and a decline in projected SACU receipts (AfDB).

Similarly to Lesotho, Eswatini faces significant volatility in its fiscal revenues, owing to highly unstable SACU receipts. The government depends on custom duties from SACU to finance almost half of its budget. The economy faces ongoing fiscal challenges, exacerbated by a weak external position. SACU's expansionary fiscal policies and low revenues have widened the budget deficit. In 2020, existing challenges were magnified by the effects of the pandemic as crisis-related expenditures increased and revenues declined. Fiscal deficit reached an estimated 8.6% GDP in 2020, prompting the government to request international financial support (AfDB). The IMF approved USD 110.4 million in emergency financial assistance under the Rapid Financing Instrument. The deficit for financial year 2021/22 was budgeted at 6.5% GDP, and was projected at 4.8% GDP in 2022/23. The government aims at a 1% GDP fiscal deficit in 2023/24 (Eswatini government). Driven by the fiscal deficit, Eswatini's public debt widened from an estimated 41.2% GDP in 2020 to 46% GDP in 2021, and is expected to further increase to 50.9% GDP in 2022 and 52.5% GDP in 2023 (IMF), remaining below the SADC threshold of 60% GDP. Due to supply chain constraints, elevated food prices and a weakening domestic currency (AfDB), inflation increased from 3.9% in 2020 to 4.3% in 2021 (IMF). It is expected to rise to 4.7% in 2022 and 4.6% in 2023 (IMF) due to increased commodity prices (especially oil). In addition to supporting economic and social recovery, the priorities are to implement a fiscal consolidation plan, as well as to implement the country's development plan (2019-2022), prioritising infrastructure, agriculture production, and economic diversification while reducing poverty. 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 to promote industrialisation across the country. Challenges include climate vulnerability (drought), lack of technological readiness and dependence on neighbouring South Africa.

Popular discontent over poor economic conditions has been increasing. Poverty levels stagnated at high levels in the last five years. A total of 60% of the population is poor overall and children, the elderly, the unemployed as well as female-headed and single-headed households are the most affected (World Bank). Income inequality is high and unemployment concerned 25.5% of the population in 2020 (World Bank modeled ILO estimate). Youth unemployment is extremely high, at an estimated 47% (AfDB). Over one quarter of Eswatini's population is infected with HIV/AIDS, the highest prevalence rate in the world (CIA).

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: February 2023