Eswatini’s exports have had a slower growth since the recovery from the shock caused by the COVID-19 pandemic. The country’s total merchandise exports had a slower growth to USD 2.1 billion in 2021. Eswatini has a highly diversified export profile and earnings from sugar have decreased despite being above the medium-term average at USD 386.6 million (approx. 18.8% of total exports) in 2021. Other top exports from Eswatini include essential oils and glassware. These exports contributed USD 477.4 million (approx. 23.2% of total exports). Eswatini’s export earnings from essential oils have continued decreasing to USD 272.5 million in 2021; and earnings from glassware have continued increasing to USD 204.9 million in the same period. Eswatini’s trade surplus continued widening from the historical medium-term average of -USD 43.2 million for 2018 to 2020, to USD 165.2 million in 2021.
Total merchandise export earnings have continued increasing which ameliorated the relieved pressure caused by net FDI inflows (foreign capital being invested domestically). Eswatini’s FDI inflows increased to USD 125.9 million in 2021. Hence, Eswatini’s FDI stock has had a seemingly delayed impact of COVID-19 and begun decreasing despite being above the historial medium-term average of USD 996.2 million for 2018 to 2020, to USD 1.1 billion in 2021. This does not bode well for Eswatini as a country that is aiming to attract more foreign investment to develop and diversify its economy away from the reliance on sugar and agricultural exports. However, this could also signify the weaning interest of international investors due to political instability in the Eswatini in recent years. Therefore, the process of economic reforms needs to happen in tandem with the social and political reforms process under the Eswatini National Dialogue process.
Remittances receipts have grown significantly over the period. Personal remittances received have begun recovering from COVID-19 from an annual average of USD 119 million for 2018 to 2020, to USD 132.2 million in 2021. Personal remittance payments to foreign nationals have begun increasing since the COVID-19 pandemic from an annual average of USD 25.2 million for 2018 to 2020 to USD 40.6 million in 2021. Eswatini has had net remittance inflows (net remittance receipts from the diaspora) which decreased to USD 91.6 million in 2021. This has affected the current account balance and strength of the SZL over the period.
The SZL has continued depreciating. Eswatini is in a monetary union with South Africa which means the SZL is pegged at par to the ZAR. In nominal terms, the SZL depreciated by an annual average of -8.7% against the USD for 2018 to 2020. The SZL depreciated by -9.9% to an annual average of SZL 14.8 per USD in 2021. Eswatini’s current account surplus narrowed from the historical medium-term average. However, Eswatini’s current account is projected to recover from 2023 onwards. In particular, Eswatini seems to have benefited from the improve climatic condition which have improved its agricultural output and exports. In addition, the global price of sugar appreciated by 4.6% to USD 0.187 per pound in 2022 (2021: +38.6%; USD 0.179 per lb).
In 2023, Eswatini is projected to record a current account surplus of USD 4.0 million (approx. 0.1% of GDP). In the medium-term from 2024 to 2026, Eswatini’s current account surplus is projected to continue widening beyond the historical medium-term average, to an annual average of USD 79.0 million (approx. 1.4% of GDP). This illustrates a persistent improvement in the current account balance but the conditions could change given the erratic nature of climate change and its adverse effects. Moreover, there are major global geopolitical uncertainties linked to the Russia-Ukraine conflict and the pending global recession. A small enclave economy like Eswatini can only survive and prosper through regional integration and deepening its relations with neighbouring countries. Therefore, Eswatini authorities will have to take advantage of the current reprieve and invest in further integration of the country’s exports in the region and grow its intra-Africa trade.
The issue of developing the Eswatini economy remains an elusive obstacle for the country. Eswatini has potential to grow its exports from essential oils and glassware. These represent the highest growth potential towards diversifying the Eswatini’s economy and export earnings. Apart from this, Eswatini should also deepen its integration in the SACU, SADC and COMESA regions and increase its intra-regional trade. This will provide an opportunity for Eswatini’s exports to compete against goods and services of comparable quality from the regions. Moreover, Eswatini can offset the risks with its traditional or global export markets by increasing its dependence on the SADC region for its exports.