priority for the economy to sustainably

ESWATINI
grow at higher levels.
Key conditions and Poverty levels have historically been
challenges high and there has been little progress in
reducing them, with close to 30 percent
of the population living below the
Table 1 2020
The Eswatini economy is closely integrat- US$1.90/day (2011 PPP) international
P o pulatio n, millio n 1.2
ed with the South Africa economy which poverty line. The poverty level rises to
GDP , current US$ billio n 4.5
makes it vulnerable to developments in just over half of the population when the
GDP per capita, current US$ 3918.9
South Africa. It exports over 65 percent lower-middle-income-country threshold
a
Internatio nal po verty rate ($ 1.9) 29.2 of its exports and imports over 70 per- of US$3.20/day is used. This, together
a
Lo wer middle-inco me po verty rate ($ 3.2) 52.1 cent from South Africa. Eswatini’s cur- with high inequality levels – with a con-
a
Upper middle-inco me po verty rate ($ 5.5) 72.0 rency, the emalangeni, is pegged to the sumption per capita Gini index of 54.6 in
a South African rand, with the banking 2017 – increases vulnerability to econom-
Gini index 54.6
b sector dominated by South African ic shocks. Unemployment was high even
Scho o l enro llment, primary (% gro ss) 114.7
Life expectancy at birth, years
b
59.4 banks. Fiscal revenues largely depend on before COVID-19, affecting 23 percent of
Southern African Customs Union the labor force in 2016.
Source: WDI, M acro Poverty Outlook, and official data.
Notes:
(SACU) revenues, which are shaped by
(a) M ost recent value (201 6), 201 1 PPPs. developments in South Africa. The coun-
(b) M ost recent WDI value (201 8).
try’s heavy dependence on highly vola-
tile SACU revenues translate into signifi-
Recent developments
cant fluctuations in public spending and
pose a challenge to the management of The economy partly recovered during the
Economic growth is estimated to have fiscal resources. second half of 2020, as reflected in the
contracted by 3.1 percent in 2020-an up- The COVID-19 pandemic has exposed service and industry sectors. It is estimat-
Eswatini’s deeper economic and health ed to have contracted by 3.1 percent in
ward revision from previous projection of
challenges. COVID-19 related deaths 2020, a slight upward revision from a pre-
-3.5 percent reflecting some recovery wit- increased significantly during the second viously projected contraction of 3.5 per-
nessed during the second half of 2020. wave, increasing by over 500 in just two cent. Easing of lockdown restrictions sup-
However, the second wave of pandemic is months compared to less than 150 during ported some construction, manufacturing
the first phase. The pandemic has and services activities. Though the manu-
dampening the recovery in 2021. Fiscal
stretched the health care system compli- facturing sector contracted in 2020, some
deficit increased in 2020 reflecting higher cated by high prevalence of HIV/AIDS. signs of recovery were witnessed through
COVID-19 related expenditure and de- The pandemic contributed to the contrac- a lesser decline in exports in 2020H2 com-
clining revenues. The slow recovery from tion of the economy in 2020. Over the pared to 2020H1.
the pandemic, will contribute to stagna- past decade, poverty levels, jobs and the Domestic revenue declined year on year
incomes of the average Eswatini citizens (y/y) by 2.7 percentage points of GDP in
tion in poverty reduction, with around a have stagnated, while public finances 2020 due to the COVID-19 pandemic
third of the population projected to live in have deteriorated. Addressing the under- while SACU revenues increased by 3 per-
extreme poverty. lying structural challenges remain a key cent to 12.9 percent of GDP. The decline in

FIGURE 1 Eswatini / Real GDP growth and Current account FIGURE 2 Eswatini / Actual and projected poverty rates and
balance real GDP per capita

Percent Percent of GDP Poverty rate (%) Real GDP per capita (LCU constant)
5 8 100 38000

3 80 36000
5
1 60 34000

-1 40 32000
2

-3 20 30000

-5 -1 0 28000
2017 2018 2019 2020 2021 2022 2023 2009 2011 2013 2015 2017 2019 2021 2023
International poverty rate Lower middle-income pov. rate
Real GDP growth (lhs) Current account balance (rhs) Upper middle-income pov. rate Real GDP pc

Sources: Ministry of Finance, Eswatini. Source: World Bank staff calculations.

MPO 232 Apr 21

revenues reflects lower economic activity employment. The dominance of the infor- start of the implementation of three-year
due to COVID-19 containment measures. mal sector means most businesses have no Fiscal Adjustment Plan. In 2021, the plan
Expenditures remained within the supple- means or safety nets to withstand the eco- focuses on recurrent expenditure contain-
mentary budget approved in June 2020. nomic shock induced by COVID-19. Fur- ment amounting to 0.6 percent of GDP
The fiscal deficit for FY2020/21 is estimat- thermore, the pandemic has exacerbated (reducing wages, goods and services and
ed to have reached 8.5 percent of GDP, the household food insecurity challenge. transfers to SOEs) and boosting domestic
mainly financed by higher SACU receipts revenue by 1.1 percent of GDP. Further,
and loans from the World Bank and the the recovery in 2021 will lead to increase
IMF to deal with the pandemic. Public
debt increased to about 45 percent of GDP
Outlook in revenues, while the loans already dis-
bursed by the World Bank and IMF have
in 2020, driven by external debt. helped to cushion the financing gap and
Annual inflation increased to 3.9 percent The second wave of the COVID-19 pan- reduced domestic expenditure arrears.
in 2020, from 2.6 percent in 2019, reflecting demic is projected to reverse the economic Debt levels will remain high in 2021, as
COVID-19 induced supply chain disrup- gains witnessed during the second half of the country is projected to borrow exter-
tions. The freeze of utility prices kept in- 2020 and constrain economic activity in the nally, given constrained domestic finan-
flationary pressures lower in 2020. Mone- short to medium term. The economy is pro- cial market.
tary policy remained accommodative in jected to grow by 1.3 percent of GDP in The current account surplus is projected
January 2021, as the repo rate was kept 2021, reflecting COVID-19 related contain- to decrease in 2021, partly due to declin-
constant at 3.75 percent since July 2020. ment measures implemented in early 2021. ing SACU revenues and higher imports of
Current account surplus increased in 2020, Inflation is expected to increase in 2021, medical necessities to deal with the sec-
partly due to surpluses recorded in trade partly due to rising oil and domestic admin- ond wave of COVID-19. However, fiscal
balance and secondary income account istered prices. The US$1.90/person/day in- adjustments are projected to contain the
(largely higher SACU revenue). Although ternational poverty rate is projected at 29.3 growth of other imports while supply
both exports and imports contracted in percent in 2021 and 29.3 percent in 2022 disruptions are projected to ease in the
2020, trade balance remained in surplus. given the mild economic recovery, together second half of 2021 boosting exports.
As a result of the socio-economic impact with high unemployment. Overall, the re-
of the pandemic, poverty is projected to covery remains uncertain and hinges on the
increase. The $1.90/person/day interna- evolution of the COVID-19 pandemic,
tional poverty rate is estimated to have rollout of the vaccines and the pace of re-
increased from 28 percent in 2019 to 29.4 covery of the global and regional econo-
percent in 2020. This was mainly due to mies, particularly that of South Africa.
lower household consumption as reduced The fiscal deficit is projected to decrease to
economic activity resulted in loss of 6.5 percent of GDP in 2021, reflecting the

TABLE 2 Eswatini / Macro poverty outlook indicators (annual percent change unless indicated otherwise)

2018 2019 2020 e 2021 f 2022 f 2023 f

Real GDP growth, at constant market prices 2.4 2.2 -3.1 1.3 1.1 1.5
Private Consumption 2.7 2.6 -3.7 2.6 2.2 2.2
Government Consumption -4.7 -3.5 -5.4 -3.7 -2.5 -2.5
Gross Fixed Capital Investment 35.1 3.3 2.3 0.3 2.9 5.3
Exports, Goods and Services 10.9 8.0 -3.2 4.9 3.7 3.9
Imports, Goods and Services -8.7 6.0 -3.6 4.1 4.5 5.1
Real GDP growth, at constant factor prices 2.4 2.2 -3.1 1.3 1.1 1.5
Agriculture 5.9 -0.6 1.9 4.5 3.4 2.5
Industry -0.3 4.4 -7.6 3.0 -0.3 4.2
Services 3.7 1.3 -0.9 -0.3 1.6 -0.4
Inflation (Consumer Price Index) 4.8 2.6 3.9 5.6 4.6 4.8
Current Account Balance (% of GDP) 1.3 4.0 5.6 4.0 3.3 5.0
Net Foreign Direct Investment (% of GDP) -0.9 -2.1 -0.1 -0.6 -0.7 -0.7
Fiscal Balance (% of GDP) -10.0 -7.2 -8.5 -6.5 -6.2 -2.9
Debt (% of GDP) 24.6 30.9 45.7 51.2 55.8 52.8
Primary Balance (% of GDP) -8.8 -5.6 -6.4 -3.6 -3.1 0.0
International poverty rate ($1.9 in 2011 PPP) a,b 28.4 28.0 29.4 29.3 29.3 29.2
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b 51.8 51.4 52.3 52.2 52.2 52.1
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b 71.4 71.1 72.1 72.0 72.0 72.0
So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA
(a) Calculatio ns based o n 2016-HIES. A ctual data: 2016. No wcast: 2017-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2016) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 233 Apr 21