… In the midst of rising inflation, tightening monetary policy and the re-emergence of supply disruptions, Eswatini outperforms Sub-Saharan Africa.
BY KWANELE TSABEDZE
LOBAMBA – Minister of Finance Neal Rijkenberg has revealed that the domestic economy proved to be one of the most resilient economies, weathering several external and domestic-induced shocks.
The Minister revealed this when delivering his fifth National Budget Speech at the House of Assembly in Lobamba today. The Minister themed the 2023 National Budget as ‘First Fruits’.
Minister Rijkenberg prefaced his domestic economy analysis by putting it in the context of the global, Sub-Saharan, and South African economic trends.
“Global economic activity is estimated to have slowed in 2022, reflecting a disrupted global economic recovery emanating from the ongoing geopolitical tensions and its associated disruptions. Global conflicts triggered sharp increases in commodity prices, in particular, that of food and fuel, following supply chain disruptions. In response, Central Banks around the globe rapidly increased policy rates, thus dampening investment spending. In light of these developments, the World Bank estimates output to have increased by 2.9 % in 2022 compared to a growth of 5.9 % in 2021. In 2023, global growth is projected to moderate to 1.7 % on account of anticipated muted economic activity, mostly for advanced economies as well as key emerging markets due to potential spillover effects from the ongoing geopolitical tensions, tightening global financial conditions and the continued Covid-induced impact on major economies like China,” revealed the Finance Minister.
“Economic activity in Sub-Saharan Africa is estimated to have increased at a slower rate of 3.4% in 2022 compared to 4.3 % in 2021 and will marginally rise to 3.6% in 2023. The slower growth forecasted in 2023 is mainly due to the continued stronger inflationary pressures as well as the increasing food security threats in the region. Economic growth in the Republic of South Africa, Eswatini’s main trading partner, is envisaged to increase at a slower rate of 1.1% in 2023 on the back of slowing domestic demand considering the inflationary challenges coupled with the weighing in of the persistent domestic structural issues, and in particular the electricity crisis,” further revealed the Minister of Finance.
“The domestic economy proved to be one of the most resilient economies, weathering several external and domestic induced shocks. Whilst on the road to recovery, the domestic economy further dealt with climate change-induced economic disturbances, which resulted in a significant loss in agricultural output due to heavy flooding in certain areas of the country. The events, combined, amounted to an estimated output loss equivalent to E6.2 billion in 2021/2022. Nonetheless, economic activity strongly rebounded in 2021, recording a robust growth of 7.9% from a contraction of 1.6 % in 2020 as a result of re-opening the economy. If one combines these two years, which are referred to as the Covid years, our economic growth out-performed all other countries in Sub-Saharan Africa”, revealed the Minister of Finance.
“In 2022, like most economies, the domestic economy grappled with rising inflation, tightening monetary policy and the re-emergence of supply disruptions, all resulting from the escalation of the global geopolitical tensions, in particular that of Russia and Ukraine, which are amongst the largest producers of key commodities such as energy, wheat and fertilizer supplies globally. The elevated inflationary pressures were transmitted into the domestic economy through hikes in the prices of food, fertilizer and fuel. This situation resulted in dampened household spending owing to strained real wages and eroded consumers’ purchasing power, weighing heavily on the performance of demand-driven sectors such as “wholesale and retail”. On the other hand, the high inflation environment resulted in a sharp increase in the cost of production. The domestic challenges coupled with subdued global demand and other trade disruptions negatively affected overall economic output. Resultantly, economic growth is very conservatively predicted to be muted in 2022, increasing only marginally by 0.4%. However historically Eswatini has outperformed these predictions in the second half, and GDP growth could actually be significantly higher,” noted the Minister.
“The medium-term prospects are currently tilted towards the positive trajectory, strongly backed by an anticipated improved fiscal path boosting domestic consumption and increased investment in infrastructure development, agriculture, manufacturing, as well as mining. These positive developments are expected to lift domestic economic growth to levels above the long-term average growth of 2.2 %, with growth in 2023 forecasted at 4.5 %,” revealed the Minister of Finance. The 2023 National Budget Speech and deliberations on the First Fruits 2023 National Budget Estimates are currently ongoing at the House of Assembly.
