MBABANE – The ongoing conflict in the Middle East is expected to slow global economic growth, fuel inflation and place additional pressure on import-dependent countries such as Eswatini, according to new projections released by the Organisation for Economic Co-operation and Development (OECD).
The Paris-based economic organisation warned on Wednesday that the disruption of global energy supplies caused by the war could have lasting consequences for economies around the world, even if oil prices peak in the coming months and begin to decline.
The OECD forecasts that global economic growth will slow to 2.8 per cent in 2026 from 3.4 per cent recorded in 2025, before recovering slightly to 3.1 per cent in 2027. The organisation attributed the slowdown largely to the impact of the conflict on energy markets, trade routes and the supply of critical commodities such as fertilisers.
The report comes as the Central Bank of Eswatini (CBE) has already expressed concern over the economic implications of the Middle East crisis, maintaining the country’s discount rate at 6.75 per cent while closely monitoring developments in global oil markets.
According to the OECD, the closure of the Strait of Hormuz, one of the world’s most important oil shipping routes, has significantly disrupted global energy supplies and contributed to increased uncertainty in international markets.
“The evolution of the Middle East conflict remains uncertain, but its economic consequences are likely to be felt for some time even after its resolution,” the OECD said in its latest economic outlook.
For Eswatini, the warning is particularly significant because the country relies heavily on imported fuel, much of which is sourced through regional supply chains that are vulnerable to global oil price fluctuations.
Central Bank Governor Dr Phil Mnisi highlighted these concerns during the bank’s latest monetary policy announcement issued on May 29.
“The Bank took a cautious approach and the need to monitor closely the impact of the ongoing Middle East crisis and oil price shock,” Mnisi said.
The Governor noted that geopolitical tensions in the Middle East had already contributed to a sharp rise in global oil prices, prompting the bank to revise its inflation forecasts upward.
According to the CBE, Eswatini’s inflation rate increased from 1.6 per cent in March 2026 to 2.0 per cent in April 2026. One of the major contributors was a dramatic increase in fuel prices.
The central bank reported that prices for liquid fuels accelerated by 23.3 per cent in April, compared to a 5.5 per cent deflation recorded during the previous month.
As a result, the bank now expects inflation to average 3.31 per cent in 2026 and rise further to 3.74 per cent in 2027.
While these figures remain lower than the OECD’s projections for the global economy, economists warn that further increases in fuel prices could quickly spill over into transport costs, food prices and the general cost of living.
The OECD report paints a worrying picture of the global economy.
Inflation among Group of 20 (G20) economies, which include the world’s largest economic powers, is expected to average 4 per cent this year and 3.1 per cent next year.
The organisation warned that shortages of oil, fertiliser and industrial commodities could continue affecting production and economic activity long after the conflict ends.
Stefano Scarpetta, the OECD’s Chief Economist, said uncertainty extended beyond energy supplies.
“The big issue of uncertainty is related not only to the depth of the energy crisis,” he said, noting that fertiliser supplies and helium, a critical component in semiconductor manufacturing, could also be affected.
The OECD reported that global oil inventories declined by more than 100 million barrels during both April and May, creating supply challenges, especially for countries heavily dependent on imported fuel.
Although much of the immediate impact has been felt in Asia, experts say smaller economies such as Eswatini are equally vulnerable because they have limited ability to absorb sustained increases in international commodity prices.
Despite these challenges, the OECD said investments in artificial intelligence and emergency government spending programmes in some countries would help cushion the global economy from a more severe downturn.
However, the organisation also presented a more pessimistic scenario should the conflict continue and energy prices remain elevated throughout 2027.
Under that scenario, global economic growth would slow dramatically to 2.1 per cent this year and 1.8 per cent next year. Inflation would rise by more than one percentage point above current forecasts, unemployment would increase and some economies would fall into recession.
“That is half of the average growth rate in the global economy in the past 25 years,” Scarpetta said.
For Eswatini, the economic risks come at a time when domestic growth has remained relatively strong.
Latest figures from the Central Bank show that real Gross Domestic Product (GDP) grew by 5.7 per cent year-on-year during the fourth quarter of 2025.
Although slightly lower than the revised 5.9 per cent growth recorded in the previous quarter, the expansion was supported by resilient performance in the services sector.
The banking sector has also shown signs of stability.
Credit extended to the private sector increased to E23.2 billion by the end of March 2026, while the ratio of non-performing loans improved marginally to 6.8 per cent.
However, concerns remain regarding the country’s external position.
The Central Bank reported that gross official foreign exchange reserves stood at E8.8 billion as of May 22, 2026, equivalent to only two months of import cover.
This leaves the country exposed to external shocks, particularly if global fuel prices continue rising or if supply chain disruptions worsen.
South Africa, Eswatini’s largest trading partner, is also facing mounting economic pressure.
The South African Reserve Bank recently revised its economic growth forecast downward and increased its inflation projections following a surge in energy prices. The repo rate was increased by 25 basis points to 7 per cent amid growing inflationary concerns.
Given the close economic ties between the two countries, developments in South Africa often have a direct impact on Eswatini’s economy, particularly through trade, fuel pricing and monetary policy alignment.
For now, policymakers in Eswatini are watching developments in the Middle East closely, aware that a conflict taking place thousands of kilometres away could have a direct impact on fuel prices, inflation and economic growth at home.
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