Country Report Swaziland January 2008

Outlook for 2008-09: External sector

We estimate that the current account will move into a deficit of 1.4% of GDP in 2007 as the trade balance becomes negative. Export earnings are expected to stagnate, owing mainly to lower volumes and prices for textile exports. In addition, Swaziland's sugar exports will be adversely affected by EU price reductions over the forecast period. Food imports will be required to offset the effects of a weak agricultural sector but import growth of consumer goods will be sluggish, in line with weak real GDP growth. The services deficit is expected to narrow in 2008-09 as growth in financial services boosts earnings, but the surplus on the income account is forecast to shrink as a result of increased repatriation of profits from foreign companies operating in the country. The current transfers surplus is also forecast to decline in 2008-09 as the expected reduction in SACU receipts takes effect. As a result, the current-account deficit is expected to widen to 3.7% of GDP in 2008 and 4.5% of GDP in 2009, reflecting Swaziland's weakening trade position and its overdependence on SACU revenue.

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