Eswatini’s global market declining
MBABANE – Eswatini’s economy is highly supported by trade, should the country fail to trade globally, the economy will decrease.
The oncoming inflation is expected to disadvantage Eswatini’s global market competitiveness.
As predicated by the International Monetary Fund’s 2020 Debt Sustainability Analysis, Eswatini’s debt stability structure is still within manageable limits, provided it remains prudent with the implementation of the 2021/23 fiscal adjustment plan which approximately accounted to about 6.5 per cent of the gross domestic product (GDP).
This was mentioned by Dr George Choongwa, the Regional Coordinator of Southern African Research Foundation for Economic Development (SARFED) in a statement.
Frustrated
Choongwa said this could be frustrated on the basis that the overall global economic outlook seems ‘ugly’ due to high uncertainty, based on the fact that there is about 25 per cent probability that growth globally will slow to less than two per cent.
He said this was in particular with the Eurozone that has been expected to grow up to 2.6 per cent this year and reduce to about 1.3 per cent in 2023 from the previous forecast of 2.9 per cent for year 2022 and 2.5 per cent in 2023.
Choongwa said the world’s economy contracted in the second quarter of this year due to high inflation in the major economic regions such as the United States, Europe, China and Russia due to both COVID-19 lockdowns and the impending geopolitical conflicts which is currently between Russia and Ukraine.
He said the continued increase of inflation increases production costs; hence bring about the implementation cost-saving measures among which could be down-sizing and retrenchment.
Choongwa said this ripple effect would then bring about increased unemployment and redundancy of human capital.
“The inflationary pressure on the South African (SA) monetary system is also likely to bring about the rise in Eswatini’s costs of production and doing business in general. This would significantly take its toll on consumers, hence putting a higher pressure on the cost-ofliving crisis which would eventually depress the households’ purchasing power.
Reduce
“Consumer confidence continues to reduce across all sectors due to increased cost of production of which included high importation cost since about 70 per cent of the products on the Eswatini Market were imported from South Africa,” he said.
The economist added that although the financial sector could be doing its best in tightening the monetary and fiscal structure for the country in a bid to moderate and arrest inflation, the country was expected to suffer from prolonged inflationary pressures due to exogenous factors, some of which include the continued level of uncertainty on the global economy.
He said as the SA economic growth rate was expected to decline in 2023 with about 1.1 per cent margin, Eswatini’s economy is likely to suffer excessive financial pressure, especially at household level.
Choongwa said some of the contributing reasons to this were the expected tightening of monetary policies in attempt to curb the global inflation which also affected SA.
However, some eminent measures likely to be taken by the SA Government could include the revision of interest rates which would then bring about reduced aggregate demand of goods and services in Eswatini as well.
Inflationary
The economist added that if the inflationary pressure continues in both SA and Eswatini, interest rates may stay at higher levels than what was witnessed in the past two to three years even after the current spike in inflation could subside.
He said this would demand a significant shift in monetary policy in a relatively short space of time whose ripple effect could be costly to households or micro-economic sector.
Choongwa suggested that the Government of Eswatini should remain prudent with its financial stability policies in spite of singles of danger emerging from South Africa’s projected loss of economic competitiveness in the oncoming period of 2023.
He said both local and international supply chain of goods and services should be harmonised in due season through value chain as to make the country boost its self-reliance while building a wider regional and global markets.