Country Report Swaziland January 2008

Summary

Outlook for 2008-09

The implementation of the new constitution is not expected to lead to any real transformation of the political system unless the modernists' demand for political parties to be allowed is met. The outcome of the current opposition challenge to the new constitution before the Supreme Court will determine the course of Swaziland's politics in 2008-09. Economic liberalisation will be central to government policy, but progress will be slow and implementation patchy. Recovery from drought will see real GDP growth edge up to 2.5% in 2008-09, but this will be constrained by ongoing problems facing the textile and sugar industries. The Economist Intelligence Unit expects inflation to follow trends in South Africa, falling to 6.5% in 2008 and 6% in 2009. We expect the current-account deficit to widen to 3.7% of GDP in 2008 and to 4.5% of GDP in 2009, owing to stagnating earnings from sugar and textile exports and lower current transfers from the Southern African Customs Union (SACU).

The political scene

The Supreme Court has begun hearing the challenge to the constitution by civic organisations. Political parties have begun planning for the 2008 elections. The courts have not yet ruled on the legality of the Swaziland Police Union. There has been slow progress in establishing the Human Rights Commission and staffing the Anti-Corruption Commission.

Economic policy

The finance minister, Majozi Sithole, has presented the medium-term budget policy statement (MTBPS), which largely repeats the same priorities of expenditure control and improved revenue collection as the previous MTBPS. The IMF Article IV mission has stressed the revenue challenge facing the government, with SACU revenue inflows expected to fall. The Central Bank of Swaziland has raised interest rates to 11% in line with the South African Reserve Bank's 100-basis-point increase between October and December.

The domestic economy

The year-on-year inflation rate rose to 9.8% in September, the highest level so far in 2007, on the back of higher food and fuel prices. A Namibian company is looking to invest E941m (US$130m) in developing biofuels in Swaziland.

Foreign trade and payments

Swaziland has agreed an interim Economic Partnership Agreement with the EU that will improve the country's access to the EU market for its textile exports, but retains quotas on sugar exports to the EU.

© 2008 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
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