2021 PROJECTED GDP FALL LOWEST IN SACU

MBABANE - Despite a negative outlook, the International Monetary Fund (IMF) has projected the highest growth for the country in the SACU region.

SACU is the Southern African Customs Union (SACU)  and it is made up of five countries of Southern Africa, namely; Botswana, Eswatini , Lesotho, Namibia and South Africa. Its aim is to maintain the free interchange of goods between member countries. It provides for a common external tariff and a common excise tariff to this common customs area. All customs and excise collected in the common customs area are paid into South Africa’s National Revenue Fund. The revenue is shared among members according to a revenue-sharing formula, as described in the agreement. Revised figures from the global lender suggest that the country’s projected real gross domestic product for the new year (2021) will be -3.5 per cent. Initially IMF had projected a 1.4 per cent growth for Eswatini as reported earlier this month.

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This figure is better as compared to that of the other members of SACU. The biggest fall, according to IMF, will be witnessed in Botswana (-9.6 per cent). Regional powerhouse South Africa’s figures also do not make for riveting reading (-8-0 per cent). Lesotho and Namibia’s growth was forecast at -4.8 and -5.9 per cent, respectively. Meanwhile, in its outlook for the country IMF had highlighted that beyond 2020, the economic outlook would remain fragile and highly dependent on continued fiscal adjustment and the implementation of structural reforms.

Growth will remain subdued in the following years as the authorities implement their fiscal consolidation plans (6½ per cent of GDP over 2021-23), before stabilising at around two per cent over the medium term. Public debt remains sustainable, peaking at around 52½ per cent of GDP in financial year 2023/24, before starting to decline slowly, shared IMF. In the outlook, IMF further stressed that government’s annual gross financing needs would remain high averaging about 19.4 per cent of GDP, leading to continued financing vulnerabilities. “Moreover, the slowdown in South Africa will adversely affect future SACU revenue, particularly in financial year 2022/23, thus generating additional budget and external financing pressures.

Positive

“On the positive side, fiscal adjustment will contain domestic demand and contribute to improve the current account balance to restore international reserve buffers. Medium-term growth prospects could improve above this baseline if successful implementation of structural reforms alleviates constraints to private investment and growth,” highlighted IMF.

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