Times Of Swaziland: THE YEAR AHEAD

THE YEAR AHEAD
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BY SANELE SIBIYA on 05/01/2022 08:16:00


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.