Swaziland Economic Outlook

• Growth stalled in Swaziland in 2011 and is expected to deteriorate in the mid-term.
• The fiscal crisis is the main factor hampering, with the need to manage high revenue volatility.
• With youth unemployment of over 50%, job creation is a key policy priority.

Swaziland faced a challenging 2011 because of a collapse of transfers from the Southern African Customs Union (SACU) receipts, a high level of expenditure (especially wages) and the limited ability of the government to borrow. The crisis has led to cuts in capital and social spending, constraining aggregate demand and undermining future growth. In 2012/13 the SACU revenues are projected to increase by almost 150%, but decline again markedly in 2013/14. This pattern emphasises the need to manage high revenue volatility, strengthen domestic revenue mobilisation, develop new financing sources, reduce corruption, strengthen procurement and spend windfall revenues  prudently. 

Swaziland’s monetary policy is restricted by its membership of the commonmonetary area. Unless long-standing fiscal and structural bottlenecks in trade and the business environment are addressed, growth in 2013 and beyond is projected to remain one of the lowest in sub-Saharan Africa.

Despite its middle-income status, Swaziland is marked by high levels of inequality and poverty (63% of the population in 2010), together with the highest HIV prevalence rate  in the world. With high unemployment, especially among the young and women, lack of jobs and absence of an entrepreneurial spirit are key challenges both for prosperity and political stability. Growth-oriented fiscal policy should be accompanied by strengthened governance and the business environment as well as improved access to credits by small and medium-sized enterprises (SMEs). Reforms on the demand side of the labour market need to be accompanied by changes in the curricula for tertiary education and the establishment of training programmes to avoid skills mismatches and shortages. The fiscal crisis underscored the need to develop adequate social protection schemes to safeguard the living standards of the poor and the vulnerable.