1.1% GROWTH FORECASTED IN 2019

MBABANE – Growth in 2019 is forecasted at 1.1 per cent, a downward revision of 0.6 of a percentage point from the September 2018 projections.

Central Bank of Eswatini Governor Majozi Sithole said the revision was in line with the lower output than earlier anticipated in the growing of crops.
Sithole said economic activity, as measured by real GDP, was estimated to have grown by 0.6 per cent in 2018 from 1.9 per cent recorded in 2017.
It was stated that the ongoing government’s cash flow challenges triggered the accumulation of domestic arrears and reinforced the need for fiscal consolidation which manifested through cuts in both recurrent and capital expenditure as well as increases in some tax rates and fees in the 2018/19 fiscal year.
The governor said this weighed negatively on construction activities and other services sectors.

“The primary sector is estimated to have grown by 5.9 per cent in 2018 from a contraction of 4.2 per cent recorded in 2017, mainly boosted by better performance in crop and animal production, which were supported by favourable weather conditions in the review period,” said Sithole.

subdued

Sithole explained that a stagnant growth was estimated for the secondary sector in 2018, down from three per cent in 2017, due to subdued manufacturing and construction activities. 
“The tertiary sector is estimated to have grown at a slower rate of 0.2 per cent in 2018 compared to 2.0 per cent in 2017,” said Sithole.

Sithole said even though the short-to–medium-term growth outlook was expected to remain challenged as the fiscal situation was not expected to improve (at least in the short-term), it was expected to gradually recover in the medium term.
It should also be mentioned that the low SACU receipts drove down the country’s gross official reserves by 31.2 per cent over the year ended March 2019 to reach E4.6 billion.
This was far lower when compared to a high of E6.6 billion in March 2018.

Explaining how the reserves decline came about Sithole said the fall in reserves was largely attributed to lower Southern African Customs Union (SACU) receipts during the 2018/19 fiscal year.
The receipts were at E5.8 billion compared to E7.1 billion during the 2017/18 fiscal year.
previous
Accordingly, the reserves were enough to cover 2.0 months of imports, lower than 3.2 months recorded the previous year.
“At this level, the import cover was below the internationally recommended level of three months,” said Sithole.

The governor narrated that short to medium-term prospects for a turnaround in the reserves were positive as government’s cash flow challenges may ease somewhat as SACU receipts for the 2019/2020 fiscal year were estimated to increase slightly.
“Coupled with fiscal consolidation measures and the implementation of initiatives by the Bank to boost the country’s reserves, the position is expected to be better for 2019/20,” Sithole emphasised.

contributions

It should be mentioned that while SACU receipts remain a relatively large contributor to government revenues, currently contributing 34 per cent of total revenue, SACU contributions to total revenue has been on a downward trend as Value Added Tax (VAT) and Pay As You Earn (PAYE) improve.

Sithole said the increase in revenue was set to come from improvements in Eswatini Revenue Authority (SRA) domestic collections and from the implementation of the new revenue measures.
Total revenue for 2019/20 were projected to reach E18.9 billion, marking an increase of about 17 per cent.

“The increase is as a result of the proposed revenue policies that are envisaged to be implemented during the 2019/20 fiscal year,” said Sithole.

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