ESWATINIKey conditions andchallenges

Table 1

2023

Population, million

1.2GDP, current US$ billion

4.6

GDP per capita, current US$3822.9

International poverty rate ($2.15)

a36.1
a58.0

a78.1

Lower middle-income poverty rate ($3.65)
Upper middle-income poverty rate ($6.85)
Gini index

a54.6

School enrollment, primary (% gross)b120.9b57.1

Total GHG emissions (mtCO2e)

3.1Life expectancy at birth, years

Source: WDI, Macro Poverty Outlook, and official data.
a/ Most recent value (2016), 2017 PPPs.
b/ Most recent WDI value (2021).

Real GDP is projected to grow by 4.1 percent in 2024, driven by continued increase in public spending financed byhigher Southern African Customs Union(SACU) revenues. Despite easing global
inflationary pressures, annual average inflation increased in 2023 but is projected
to slightly decline to 4.9 percent in 2024.
The budget deficit is projected to continue
declining in 2024, though fiscal policy remains highly procyclical. The poverty rate
is projected to decrease slightly to 52 percent in 2024 using the poverty line for lowerand middle-income countries.

Over the past 20 years, Eswatini’s GDP per
capita growth only averaged 1.8 percent.
The proportion of the population living below the US$3.65/day (2017 PPP) poverty line
fell from 76.4 percent to 58.1 percent between 2000 and 2016, but at 52 percent in
2024 poverty remains high. The country’s
low growth rate can partly be explained bydeteriorating public finances, characterizedby rising public debt, the accumulation ofdomestic expenditure arrears, and public
spending inefficiencies. Concurrently,
structural weaknesses have hindered thedevelopment of the private sector. These include a weak investment climate due tocumbersome
regulations,distortions
caused by inefficient state-owned enterprises, and a limited access to regional and international markets. Adopting a comprehensive strategy that accumulates more physical and human capital, while ensuring more
efficient and inclusive use of these resources, will be critical for Eswatini to meetits development goals. The government isworking on a new growth strategy.
Volatile SACU revenues have shaped themacro-fiscal dynamics. The increase in rigidspending lines, such as wages and interest
payments in the face of volatile SACU revenue, contributed to rising fiscal deficits,
public debt, and arrears. To make fiscal policy more predictable and countercyclical,
there is an urgent need to consolidate expenditure including implementing the state

owned enterprises (SOEs) reforms and,improve domestic revenue mobilization.
Poverty and inequality remain high. Over50 percent of the population live below theUS$3.65/day (2017 PPP) lower middle-income country poverty line. High and persistent inequality (54.6 percent in 2016) isalso a risk to social stability.

Recent developments
Real GDP rebounded to an estimated 4.8
percent in 2023 (from 0.5 percent in 2022),
driven by an increase in services and exports. The doubling of SACU receipts allowed the government to reduce the overall fiscal deficit, while increasing spendingthat boosted government-linked services.
Meanwhile, agriculture contracted by 2.5
percent, mainly due to weather-related
challenges that affected production.
Annual average inflation increased from4.8 percent in 2022 to 5.0 percent in 2023
despite easing global inflationary pressures. The increase was partly the result ofhigher prices for transport and food. Thesepressures continued in early 2024, with inflation increasing from 4.3 percent in December 2023 to 4.5 percent in January 2024(yoy). However, inflation remained within
the 3-6 percent band, with the central bankmaintaining the repo rate at 7.5 percent
since July 2023.
The fiscal deficit declined from 5 percent of GDP in 2022 to 2.1 percent in
2023, but expenditure arrears increased
again. Revenue was boosted by the morethan doubling of SACU receipts in 2023.

FIGURE 1 Eswatini / SACU revenues and macroeconomic
variables

FIGURE 2 Eswatini / Actual and projected poverty rates andreal GDP per capita

Percent of GDP
141210864
20-2-4-6-82018
2019

Poverty rate (%)

Months of imports, percent of GDP
432

102020Current account (lhs)
Fiscal deficit (lhs)202120222023e

Real GDP per capita (constant LCU)

100

50000

90

45000

80

40000

70

35000

60

30000

50

25000

40

20000

30

15000

20

10000

10500002024f

02009 2011 2013 2015 2017 2019 2021 2023 2025

SACU revenue (lhs)International reserves (rhs)

Sources: Eswatini Ministry of Finance and World Bank projections.

International poverty rate

Lower middle-income pov. rate

Upper middle-income pov. rate

Real GDP pc

Source: World Bank. Notes: see Table 2.

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Apr 24

Expenditure also increased as a result of ahigher public sector wage bill, interest payments, and election-related expenditures.
While the level of public debt declined between 2022 and 2023, arrears increased
again, due weak commitment controls,
reaching an estimated 2.0 percent of GDP inFebruary 2024. The government establisheda SACU Revenue Stabilisation Fund in 2023,
but it has not been fully capitalized, as expenditure pressures continued in 2023.
The current account returned to a surplus
in 2023, reflecting higher SACU revenue
and an increasing trade surplus, fueled byhigher exports of key commodities as such
soft drink concentrates, sugar and sugar
products. The level of international reserves remained constant at 2.6 months ofimports in 2023.
While the increase in economic activity has
contributed to higher income, higher transport and food prices disproportionately affect the poor, who spend a larger share of
their resources on these items. High inflation has limited the progress in poverty reduction, with estimated poverty rates only
showing a slight decline from 54 percent in
2022 to 52.8 percent in 2023, using the lowermiddle-income country poverty line.

OutlookThe medium-term economic outlook
looks moderately favorable, with GDP
growth stabilizing at about 3 percent
over 2024-26. Growth is expected to be
driven by higher investments, includingfrom the government (due to higher
SACU revenue), and sustained improvements in industry and services. By contrast, the agricultural sector could be negatively affected by climate change, which
could hurt the poor most. Risks are tilted
to the downside given uncertainty in amajor trading partner (South Africa), especially on energy supply, and international geopolitical tensions. Domestically,
the country remains exposed to socialand political uncertainty. Inflation is projected to slow slightly to 4.9 percent in
2024, following global trends, but elevated crude oil prices, a weaker exchange
rate, and higher food prices could marthis outlook.
On the fiscal side, SACU revenues areprojected to increase again in 2024, by
11.5 percent relative to FY2023/24. ThisTABLE 2 Eswatini / Macro poverty outlook indicators

increase should contribute to a reductionin the fiscal deficit and the payment ofaccumulated expenditure arrears. However, the magnitude of the adjustment
will also depend on public expenditures,
especially the public sector wage bill and
SOEs reforms. The government should
capitalize on the positive revenue shockby fully operationalize the SACU Revenue Stabilisation Fund while continuing with fiscal consolidation- both expenditure reducing and domestic revenue mobilization measures. Debt isprojected to stabilize in the mediumterm, as the fiscal deficit declines. The
current account is expected to remain in
surplus in 2024, on the back of higher
SACU receipts and increased export demand of key products.
Poverty, based on the lower-middle-income country poverty line, is projected to
decline from 52 percent in 2024 to 51.3
percent in 2025. While the projected economic recovery should have a positive
impact on households, such improvement
will be constrained by the lower agricultural production and structural challenges facing the poor including low job
creation and low access to services.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices
Private consumption
Government consumption
Gross fixed capital investment
Exports, goods and services
Imports, goods and services

2021
10.7
5.7
-10.6
11.4
8.8
14.0

2022
0.5
-5.3
-0.3
-10.8
-0.4
3.4

2023e
4.8
4.1
9.7
1.0
8.0
7.0

2024f
4.1
3.2
2.2
9.6
2.6
2.7

2025f
3.3
2.6
0.8
7.0
2.4
2.0

2026f
2.7
2.6
0.8
3.5
2.4
2.0

Real GDP growth, at constant factor prices
Agriculture
Industry
Services

10.7
4.6
17.9
7.1

0.2
5.1
-0.3
-0.1

4.8
-2.5
1.5
8.2

4.1
-1.2
4.0
4.9

3.3
1.9
3.0
3.7

2.7
2.5
2.0
3.2

Inflation (consumer price index)

3.7

4.8

5.0

4.9

5.2

5.3

Current account balance (% of GDP)Net foreign direct investment inflow (% of GDP)

2.6
1.2

-2.4
0.7

4.0
0.8

2.3
0.8

0.60.7-1.5
0.7

Fiscal balance (% of GDP)
Revenues (% of GDP)
Debt (% of GDP)
Primary balance (% of GDP)

-4.6
25.1
37.9
-2.7

-5.0
23.9
41.8
-2.7

-2.1
29.4
38.9
-0.2

-2.0
27.7
35.4
-0.3

-2.7
26.3
33.5
-1.2

-1.3
24.5
31.2
0.1

30.9
53.7
76.1

31.0
54.0
76.2

29.6
52.8
75.1

28.5
52.1
74.7

27.5
51.4
74.2

26.9
50.7
73.7

5.8
48.2

0.4
47.9

0.7
47.5

2.8
48.0

4.0
49.1

4.1
50.3

a,bInternational poverty rate ($2.15 in 2017 PPP)a,b
Lower middle-income poverty rate ($3.65 in 2017 PPP)a,b
Upper middle-income poverty rate ($6.85 in 2017 PPP)
GHG emissions growth (mtCO2e)
Energy related GHG emissions (% of total)

Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
a/ Calculations based on 2016-HIES. Actual data: 2016. Nowcast: 2017-2023. Forecasts are from 2024 to 2026.
b/ Projection using neutral distribution (2016) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU.

MPO2Apr 24