LOBAMBA (14 February 2025): Eswatini’s 2025 domestic real GDP is projected to peak at 8.3%, the highest in almost 30 years. The economy is expected to benefit from public infrastructure construction activity, especially the Mpakeni Dam in Lavumisa and the Lower Maguduza Hydro Electricity project on the Lusutfu River.
The growth is nearly double the 4.8% GDP of 2024. The minister of finance Neal Rijkenberg in his budget speech for 2025, said significant acceleration in economic growth is largely accounted for by the upscaled construction activity. He said earmarked projects are projected to directly contribute 2.5 % points to the overall growth outcome in 2025.
Other supporting sectors such as ‘transportation’, ‘quarried stone’ production, ‘manufacturing of construction material’, ‘wholesale and retail’ and ‘financial services will also benefit from the construction activity and contribute positively to the overall outcome.
In the primary sector, double digit growth is expected for ‘mining and quarrying’ and ‘forestry activities. The ‘mining and quarrying’ sub-sector growth would be on account of expansions in coal mining and anticipated increase in quarried stone production to support construction activities particularly that of big dams and planned roads.
The minister said GDP growth is however projected to slow down in the outer years, to 4.8% in 2026 and 3.1 % in 2027 as projected by our Macro Forecasting Team. The envisaged deceleration in economic growth is on account of high base effects from 2025, coupled with the completion of some projects with prospectively slower replacement ratio. The implementation of public and private projects (i.e., energy projects, roads, dams and other infrastructural developments) will continue in the medium-term, conditional on availability of financing.
The mining sector is expected to maintain strong growth buoyed by increased production in coal and exploration of other minerals. The tourism industry is expected to recover to pre-COVID levels and maintain steady growth in the medium-term. Strong growth is also expected in the textile industry, driven by expansions in factory shells and a better penetration of markets particularly in the US market under the AGOA. The Government will be very intentional to counter these lower projected figures by targeting the pro-growth sectors like mining, ICT and agriculture.
The domestic economy reflected resilience as economic activity rebounded strongly in 2023. Real gross domestic product (GDP) increased by 5.0%, from a contraction of 0.1% in 2022. In 2023, growth was strongly underpinned by increasing domestic demand, induced by national events. These events spurred activity in some of the demand-driven sectors such as the ‘information and communication’ and ‘wholesale and retail’. Government operations also reflected a rebound in the period backed by the improved fiscal stance in line with higher SACU receipt as well as the increasing demand for Government services associated with the election activities.
Similarly, mining activity increased in 2023, contributing 0.36% points to overall real GDP growth. The sector benefited from expansions and new investments in coal production. On the contrary, agriculture production slumped in 2023, with the sector affected by increasingly erratic weather conditions during the farming season. Maize production declined by 33% whilst sugarcane output contracted by 2.7% in the period.
The minister said latest projections (GDP Projections Review, January 2025), real GDP growth in 2024 will be 4.8% (previously projected at 3.6% in September 2024). Manufacturing activity is expected to have sustained the growth momentum in 2024, mainly the manufacture of sugar as well as manufacturing of chemicals, rebounding from a slow growth in 2023. Similarly, primary activity, including the growing of crops in the agriculture and forestry sub-sector, is expected to slightly rebound in anticipation of better yields mainly in the sugar industry, previously affected by unfavourable weather conditions. On the contrary, growth in the services sector is expected to have slowed in 2024 on account of 2023’s base effects linked to the national elections. The slowdown in activity will be observed in sectors such as the ‘wholesale and retail’, reflecting winding down of consumption demand as well as ‘public administration’ due to lower hiring compared to 2023.
The medium term (2025 – 2027) economic outlook is also positive.
The minister said positive economic prospects are envisaged in the medium-term as economic activity is projected to accelerate by an average of 5.4 percent between 2025 and 2027. The medium-term growth will be supported by expansions in energy related projects as well as the upscaled implementation of public sector investment projects such as the Mpakeni dam under the MNWAP project, construction of the MR14 and MR21 roads, construction of the parliament building, the strategic oil reserve as well as the completion of the International Convention Centre and Five Star Hotel, among others.
Inflation easing
Mr. Rykenberg reported that domestic inflationary pressures eased in 2024 as headline inflation averaged 4% in the year compared to an average of 5% in 2023. This was mainly attributable to the slowdown in food inflation, which fell by 8.9% points from 12.8% in 2023 to 3.9% in 2024. On the other hand, inflation for housing rentals and utilities increased from 4.8% in 2023 to 7.0% in 2024 as this category responded to an upward tariff adjustment made effective on the 1st of April 2024. Domestic inflation is expected to remain within the target band of 3 – 6 percent in the short to medium term, he said.
In the medium-term, international oil prices are expected to remain below US$75 per barrel due to reduction in global demand and elevated global oil production. The Rand exchange rate to the US Dollar is anticipated to be stable in the medium-term. However, it faces a high risk of volatility and mild depreciation due to the uncertainty surrounding US policies over the next four years. Upside pressure on the inflation outlook is still expected mainly due to anticipated hikes in administered prices, such as electricity and water tariffs in 2025. The inflation forecasts are envisaged to increase, averaging slightly above 4.5 percent for both 2025 and 2026.
Balance of Payments
External sector projections indicate that Eswatini’s current account balance will post a surplus of E956.7 million in 2024, following a current account surplus of E1.9 billion recorded in 2023. The 2024 current account surplus is informed by a projected trade surplus of E3.8 billion, as exports continue to grow faster than imports. Data for January-November 2024 indicates that leading export commodities, namely, soft drink concentrate’ and ‘sugar’ which account for over 60 percent of total exports, have performed well in 2024.
Eswatini’s main trading partner for exports and imports is South Africa, as 70 percent of merchandise goods are sold and received from that market. Our country’s positive merchandise trade balance is, however, eroded by the growing deficit of the services account balance, which emanates mainly from multinationals sourcing valuable services from outside of the country. SACU receipts continue to influence the current account balance. However, SACU receipts are projected to decline from the 2025/26 financial year, into the outer years. This, coupled with an increase in payments for services is expected to weaken the current account balance going forward.
Jm/today/18.02.25
