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WORLD BANK REVISES ESWATINI OUTLOOK DOWNWARDS

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MBABANE - The World Bank has revised the country’s 2021 growth outlook downwards by 0.2 percentage points.

In its June Global Economic Prospects report released on Tuesday, the World Bank said Eswatini’s gross domestic product (GDP) would fall from a forecasted 3.3 per cent to 3.5 per cent. According to the World Bank, the economy is projected to grow by 1.3 per cent of gross domestic product (GDP) in 2021, a downward revision from a previously projected growth of 1.5 per cent, reflecting COVID-19 related containment measures implemented in early 2021. The country has been under lockdown in early 2021 entailing travel restrictions, a ban on most gatherings except for funerals and restriction on business operating times. This affected both demand and supply.

Worth mentioning is that the World Bank’s projections are far below government’s forecast. According to official projections issued in January this year,  GDP is projected to increase by 2.7 per cent in 2021 and an average of 2.3 per cent in 2022 and 2023. The country’s economy was not spurred from a recession in 2020. Economic growth, as measured by real GDP is estimated to have contracted by 2.4 per cent  last year from 2.2 per cent expansion in 2019, with a sharper decline observed during the second quarter of the year.

The secondary and tertiary sectors were the most affected, while the primary sector depicted some resilience. The secondary sector (in particular, manufacturing and construction) was mainly affected by labour, value chain and trade disruptions arising from the negative effects of COVID-19. Eswatini received financial support from the World Bank and International Monetary Fund in financial year 2020/21 that helped ease fiscal challenges. The access to these finances enabled the government to close the financing gap and reduce domestic expenditure arrears. The fiscal deficit stood at 8.7 per cent of GDP in 2020, as public spending increased responding to the pandemic while revenues fall as economic activity declined. The fiscal deficit is projected to narrow over the medium term, as the government implements the three-year fiscal consolidation plan in the face of an anticipated decline in Southern African Customs Union (SACU) revenues.

Account

The current account surplus is expected to increase this year. Exports are expected to pick up from this year onward, as COVID-19-related trade and supply disruptions ease.

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