- Capital: Mbabane
- Region: Southern Africa
- Official language: Swazi and English
- Independence Day: September 06, 1968
- Area: 17,000 sq km
- Population (2018): 1.14 million
- REC membership: SACU, SADC
- WTO membership: January 1, 1995
- GDP (2018): US$ 4.711 billion
- GNI per capita (2018): US$ 3 930
- Currency: Lilangeni
Real GDP growth was estimated at 1.4% in 2019, an appreciable decline from 2.4% in 2018. Economic activity was supported by growth in manufacturing and agriculture, which stabilized following a regional drought in 2015–16. Unabated fiscal challenges impeded domestic demand and generated large domestic arrears that constrained private sector activity linked to government, thus inhibiting economic growth. Construction has contracted since 2017, while services weakened due to poor performance by the wholesale, retail, and public administration subsectors.
The fiscal situation remained weak, with the budget deficit estimated at 7.8% of GDP in 2019, up from 6.5% in 2018, with low revenues outpaced by elevated expenditures, particularly transfers, the wage bill, and capital outlays. Deficits are financed by central bank advances, drawdowns of reserves, and external and domestic borrowing. Public debt escalated to nearly 30% of GDP by mid-2019, raising sustainability concerns.
The current account surplus increased slightly to an estimated 2.4% of GDP in 2019 as exports recovered. Official reserves remained below the recommended three months of import cover, thereby threatening parity with the South African rand and weakening resistance to shocks. Inflation was estimated at 2.7% in 2019, down from 4.8% in 2018, as utility and food prices remained capped. Inflation is expected to remain tamed in the short term, dampened by a freeze on utility costs. Because of the falling prices, the central bank lowered the discount rate to 6.5% in July 2019 to support growth. The domestic currency remained under pressure because of low investor confidence and protracted global trade tensions that have affected emerging market external positions.
Real GDP growth is projected at 2.5% in 2020, spurred by industrial growth and agricultural expansion, but is expected to slow to 1.2% in 2021. Accommodative monetary policy should boost domestic demand with increased private sector borrowing. And growth in South Africa, if sustained, will provide export receipts and Southern African Customs Union (SACU) receipts to ease fiscal constraints.
Revival of the African Growth and Opportunity Act and European Free Trade Association trade preference markets improve the outlook for textiles and meat processing. And new trade agreements will present fresh markets for eSwatini and provide an impetus to growth.
Implementing structural reforms articulated in the Strategic Roadmap for Economic Recovery and the National Development Plan (2019–22) should ease the regulatory environment, reduce business costs, support fiscal consolidation, clear domestic arrears, and eliminate structural rigidities. Infrastructure investments will sustain growth and employment. The development of agribusiness, agroprocessing, and commodity value chains will help build processing capacity.
Poverty, inequality, high unemployment (youth unemployment at 47.4%), and HIV/AIDS prevalence at 27.2% among adults ages 15–49 remain key challenges. The weak fiscal situation, exacerbated by uncertain SACU inflows against a backdrop of high spending, will aggravate macroeconomic imbalances. The continuing domestic arrears buildup and escalating public debt heighten fiscal risks, raise debt sustainability concerns, and potentially undermine business confidence. The tight budget regime, particularly toward growth-enhancing capital projects, will constrain domestic demand, curtail industrial activity, and thus impede faster growth. Construction, mainly government-financed road projects, remains the major casualty of the constrained fiscal environment. Slower than anticipated public finance management reforms, in particular expenditure rationalization and wage bill containment, may impede fiscal stability.
Last updated: April 2020