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Select Economic and Financial Indicators2014201520162017e2018f
Real GDP (% change)3.61.10.00.3-0.9
GDP (USD bn)4.33.93.84.04.0
Inflation (average)5.75.08.06.35.4
Fiscal Balance (% GDP)-1.1-4.6-10.5-8.2-5.1
Broad Money (% change, end period)16.813.1-4.8-1.07.0
Population (mn)1.111.121.131.151.16
Exports (USD bn)2.22.01.91.92.0
Imports (USD bn)2.42.02.02.22.2
Current Account Balance (% GDP)3.410.80.7-1.10.2
FX Reserves (USD bn, end period)0.80.50.50.50.5
Exchange Rate (average)10.8512.7814.7013.3113.16
Sources: IMF, World Bank, UN, Bloomberg, Ecobank Research

Economic Outlook

Economic Outlook

Real GDP: Swaziland’s economy is expected to contract in 2018 following stagnation in 2016-17. This weakness has been caused largely by a prolonged drought, amid adverse weather conditions, undermining food security and exports, alongside weakness in neighbouring South Africa. Growth also remains heavily dependent on revenues from the Southern Africa Customs Union (SACU), which are recycled into the economy. A fall in SACU revenues in the 2016/2017 fiscal year – amid a slowdown in South Africa (SACU’s largest economy and importer) – contributed to the economic malaise in 2016 and 2017. As South Africa is the dominant economy and largest importer in SACU, its fellow members benefit from increased SACU receipts when South Africa increases its imports. As Swaziland relies on South Africa for around 65% of its exports, an improving South African outlook will help to ease Swaziland’s situation beyond 2018. Nonetheless, consistent growth will require investments in human capital and an inclusive social-safety net system to address the country’s endemic poverty.

Inflation: is expected to slow in 2018 as inflationary pressures caused by drought in the region have eased somewhat, helping to moderate food prices. The lilangeni’s peg to South Africa’s rand should also help to anchor prices. We expect annual average inflation to slow to below 6% in 2018.

Fiscal balance: The fiscal deficit is expected to continue to narrow in 2018 from 8.2% in 2017 and 10.5% in 2016 when SACU revenues declined against a backdrop of expansionary fiscal policy. The improvement will come from a strengthening of SACU revenues, amid improved South African economic growth prospects, as well increased agricultural production due to better weather conditions.

Current account: Improved agricultural output should help to support a rebound in the country’s key export, essential oils, helping to support a narrower current account deficit over the outlook period. Higher growth in South Africa over this period is also set to improve Swazi exports, as well as increasing import revenues for SACU. The current account balance is forecast to return to a small surplus in 2018, from a deficit in 2017; however the current account position will remain weaker than previous years, in which the country ran larger current account surpluses.

Risks

There are remarkable divergences in the availability of social and economic amenities among the urban and rural areas, underscoring the need for the government to ensure that opportunities to promote inclusive growth are put in place for the benefit of all Swazis. Despite Swaziland’s classification as a low middle-income country, economic issues that are mainly associated with low-income countries – such as a weak business climate and low foreign direct investment (FDI) inflows – prevail. The high rate of HIV/AIDS and an uneven distribution of resources remain major social concerns.

Swaziland’s dependence on inflows from volatile SACU revenues also remains a concern, highlighting the need for improved domestic revenue mobilisation, and a strengthening of public financial management.

Likewise, dependence on the fate of South Africa’s economy, as the main destination for Swazi exports, points to the need for Swaziland to diversify its exports market in order to avoid current account shocks.

FX, FI and Commodity Information

FX, FI and Commodity Information

Exchange rate structure

RegimeFixed
TargetSZL1 to ZAR1
Type of interventionVia Central Bank
Convertible currency?Yes
Market participantsn/a
Source: Bloomberg, IMF, and Ecobank Research

FX

FX ProductsSpotForwardsNon-deliverable ForwardsOptionsSwaps
On offerYesNoNoNoNo
Daily trading volume (USD mn)n/an/a
Average trade size (USD mn)n/a
Average spreadn/a
Trading hoursLimited
Settlement cycleT+2
FX Market StructureThe SZL is guaranteed by a pegged exchange rate with the ZAR. The stability of the peg is ensured by an adequate level of net international reserves held by CBS.
Non-resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowNon-residents of CMA zone are subject to exchange rate restrictions which require central bank approval for capital flows.n/a
Financial flow
Resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowNo restrictionsn/a
Financial flow
Source: Bloomberg, IMF, and Ecobank Research

FI

Primary MarketTreasury billsTreasury notesTreasury bondsCentral Bank billsOMOs
IssuerGovernmentn/aGovernmentn/a
End useGovernment financingGovernment financing
Maturity structure91- to 364-days3- to 10-yrs
CouponZeroFixed
Coupon paymentsn/aSemi-annual
Secondary Market
Daily trading volumeNo tradingn/a
Average trade sizeNo trading
Settlement cycleT+2
Nedbank contact details for Swaziland
Nedbank Swaziland Limited, P.O. Box 68, Mbabane, Swaziland
Tel: +268 2408 1000
Source: Bloomberg, IMF, and Ecobank Research

FI primary market information

FI primary market information

Swaziland Debt2014201520162017e2018f
Government debt (% GDP)14.318.525.231.135.3
Sub-Sahara average44.552.656.155.655.8
External debt (official creditors, % GDP)7.69.49.311.413.6
Sub-Sahara average25.530.231.932.933.2
External public debt stock (USD bn)0.30.40.40.50.5
Share of total sub-Sahara debt (%)0.10.10.10.20.2
Source: IMF and World Bank

Commodity and trade information

Commodity and trade information

Hydrocarbon & mineral production

Swaziland’s mining sector was once dominated by iron production, with output reaching 573,000 tonnes in 2014 (all for export). However, following the collapse of mining company SG Iron in response to slumping international iron prices, iron mining in Swaziland has ceased. The rest of the country’s mining sector is comprised of small-scale production of tin, coal, diamonds and gold. Swaziland has no known oil and gas reserves and must import all its refined products. Swaziland consumes 250,000 tonnes of refined product annually, all of which are imported from South Africa.

Soft commodity production

Despite the country’s small size, Swaziland is the second largest sugar producer in Sub-Saharan Africa (after South Africa), with output of 700,000 tonnes of raw sugar in 2016/17. Unlike other African sugar producers, Swaziland’s sugarcane is irrigated, leading to high yields of above 100 tonnes per hectare. Coupled with ideal growing conditions, this makes the country one of Africa’s most cost-competitive sugar producers. The country’s sugar sector is dominated by large millers and estates, which represent over three quarters of sugarcane production. Swaziland is also a major producer and exporter of beef to South Africa. Other agricultural output is on a small scale, with production of maize averaging just 100 tonnes per year. As a result, Swaziland is a major importer of maize from South Africa (2.6% of Africa’s maize imports, alongside Lesotho the highest in Africa proportional to the country’s population).

Trade flows

Imports

Swaziland’s imports totalled US$1.5bn in 2017. Given the country’s lack of refining capacity, Swaziland is dependent on imports of petroleum products (worth US$136mn in 2017) and of electricity imported from South Africa (worth US$50mn). The country is also reliant on imports of vehicles, electronics & machinery (together worth US$289mn in 2017), reflecting the poorly developed manufacturing sector. Swaziland also imported iron & steel (worth US$75mn), plastics (US$63mn) and cement (US$21mn) for its industrial sector. With large parts of the country’s agricultural sector given over to sugar production, the country depends on imports of food, including cereals (worth US$42mn in 2017), beverages (US$34mn) and dairy products (US$25mn).

Exports

Swaziland’s exports totalled US$1.7bn in 2017. The country’s most valuable commodity exports are essential oils (used in the cosmetics industry), worth US$540mn in 2017, sugar (US$365mn) and chemical products (US$212mn), all of which were exported primarily to South Africa for re-export to markets across Sub-Saharan Africa and the EU. The country’s historically most important export, sugar, mostly goes to the EU under preferential market access. Swaziland also exports textiles & apparel (worth US$222mn in 2017), mostly to South Africa, as well as wood (US$92mn) and vegetables (US$36mn).

  • Flag
  • Population
    1.16 M
  • Area
    17,364 sq km
  • Capital
    Mbabane
  • Largest city
    Mbabane
  • Official language
    English and siSwati
  • Major languages
    English and siSwati
  • Currency
    Swazi lilangeni

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