Home | Feature | THE YEAR AHEAD

THE YEAR AHEAD

Font size: Decrease font Enlarge font

Analysts at the IMF and the World Bank predict a global GDP growth of 4.4 per cent for 2022.

This growth is expected to come on the backdrop of a strong economic rebound in advanced economies, while emerging economies are expected to posit a lacklustre growth circling around two per cent for most emerging economies. These projections come amid inflation fears, global supply chain issues and increases in COVID-19 numbers perpetuated by the omicron variant.  The inflationary pressures have already prompted major central banks in the global north to start increasing interest rates. A positive growth is projected since the inflation should decelerate as the stimulus checks get spent and global supply chains are restored as more people get vaccinated; it is expected that the inflation should remain to pre-covid levels in the second half of the year.

Domestic economy

The IMF projects the domestic economy to grow by a weak 0.7 per cent in 2022, presenting weak sentiments for the economy. The major contributor to the poor growth prospects is the COVID-19 situation and the poor vaccine roll out which has halted the economy, production is minimal with all the isolations and different stages of lockdowns. Although the recent inflation figures show a slowdown in inflation, one should caution that we should start seeing an increase in the general price levels, as we begin to import inflation, these should be more stuck in the first and second quarters of 2022.

This will put pressure on the Central Bank to increase interest rates, which is expected in the seating of the next MPC of mid year mostly as a precautionary measure since this is a supply side movement in inflation which central banks do not have that many tools to control. This growth will largely be led by growth in the retail and wholesale sectors, with modest growth in the services sector; construction is expected to decline as the banks have a low appetite for new risks given the gloomy and uncertain future.

Impact of political risk

The country has experienced political instability that is unprecedented since independence. The country is at political crossroads and the outcome of which will determine whether the growth figures will be revised upwards or downwards. The political instability and the mass radicalisation of our people has rendered our business environment very volatile. It presents with it risk that cannot be diversified or shifted to another party; this type of risk, termed general risk, tends to push investors away.

Capital likes stability. At the present moment we should be grateful that we have a one-to-one peg to the South African Rand, this has encored our economy against an interest rate depreciation or rather a weak currency precipitated by the loss of international investor confidence on the domestic economy. It is important that the upcoming dialogue is handled with utmost care as the health of our economy depends on its outcome. We can only hope for a just and fair dialogue, to spur us back into a sense of permanent calm in the kingdom. This, according to me, is the main event to look out for and the political risk is the main event that we shall contend with as an economy, since science shows that even though Omicron is more infectious but it is less lethal. Hence at this point we can move the covid risk a bit lower in the risk management matrix.

Managing 2022

There is major need for government to inject a stimulus in the economy that will be utilised to kick-start the economy. The economy needs to inject some money in the economy aimed at the private sector so to kick-start production. The aim should be to either pump money to the private sector as a stimulus or through the purchase of goods and services so that production can at least return to pre-covid levels. This can also be a stimulus through direct injection to households so to stimulate consumption, the COVID-19 pandemic gives a good excuse for one to inject a transfer payment into households, and can also be used to buy political mileage and a sense of calm in the kingdom. There is also need to expand vaccine coverage so that all sectors of the economy can reopen with ease, the stimulus can be used as an incentive to get a jab depending on how it is structured.

Private sector

Albeit the risk and uncertainty faced by the economy, there still exist good opportunities to take advantage of in 2022. I foresee a lot of growth in the tech sector as working from home becomes the new normal and it is likely to remain the new normal even post-covid. One example is an online educational system for public schools in Eswatini, every crisis brings with it opportunities and those that ride on those opportunities get to lead the recovery out of the crisis. Households should ensure that they can subsist (backyard gardens) to shoulder market risks.

Comments (0 posted):

Post your comment comment

Please enter the code you see in the image: