Eswatini economy declines as Russia, Ukraine war continues

SITEKI – Regardless of the unfolding political turmoil in the country, the Eswatini economy is experiencing a decline due to the mounting global inflation and the ongoing war between Russia and Ukraine.

Economic performance in Eswatini fell in the second quarter of the year, reflecting the elevated strain emanating from the mounting inflationary pressures globally and in the domestic economy.

As a result, domestic production dropped by 1.6 per cent when compared to the same period in 2021.

Significant output decline was observed in manufacturing, construction, wholesaling and retailing activities in the period as the strong demand observed in the previous year waned in light of eroded purchasing power parity.

Report

This was the ultimate projected economic activity report contained in the second quarter performance report of the Ministry of Economic Planning and Development presented to the members of the ministry’s Portfolio Committee under the auspices of Dvokodvweni Member of Parliament (MP) Mduduzi Magagula on Wednesday.

Minister Dr Tambo Gina made the presentation of the report in the presence of Principal Secretary (PS) Thabisile Mlangeni together with Chief Economist Sifiso Mamba, Director of Millennium Project Patrick Mnisi, Principal Statistician Thembinkosi Shabalala and Micro-Projects Director Sibusiso Mbingo.

The minister said from a medium-term projections point of view, domestic economic activity was forecasted to slowdown in 2022 with growth reaching 1.2 per cent compared to 7.9 per cent in 2021.

Surge

Gina noted that nevertheless, economic activity was expected to surge in the medium-term averaging 4.1 per cent mainly supported by industry expansions in the manufacturing sector as well anticipated positive economic spill-overs from the implementation of strategic public projects like dam and other infrastructure projects. The Lubulini MP further mentioned that on domestic prices, the headline inflation recorded at 5.8 per cent in the second quarter compared to 3.8 per cent in 2021/22.

He stated that this was significantly affected by hikes in the prices of basic goods in the consumption basket such as fuel, food and transport that drove the rise in the overall domestic prices in the period.

Furthermore, Gina said this was mainly transmitted from the hiking global commodity prices for food and energy commodities like crude oil, edible oil, wheat to mention a few.

Pressures

“As a response to curb the mounting inflationary pressures, the monetary policy tightened as the bank discount rate was raised by a cumulative 150 basis points to reach 6.0 per cent in the period. Other economic indicators such as the reserves, exchange rate as well as government fiscus were also vulnerable to the prices shock in the period, broadly weakening the government’s cash-flow position,” he said.

Worth noting is that the minister stated that on the global perspective, economic growth was expected to moderate in 2022, averaging 3.2 per cent compared to the strong rebound of 6.1 per cent in 2021.

Adding, “The toned-down economic growth is envisaged in light of the rising global inflation as well as the re-emerging of supply chain disruptions emanating from the ongoing conflict between Russia and Ukraine.”