Mbabane: The Southern African Research Foundation for Economic Development (SARFED) has urged government to focus on strategic industrial development for economic growth and recovery.
In its weekly economic and Business Commentary, Volume 5, issue 34 of November 2021, SARFED suggests that government must focus on strategic industrial development to boost economic growth.
SARFED noted that Eswatini’s economy is likely to grow by 2.5 percent in 2022. The research institution noted that despite the challenges that the country has been subjected to in the past two years with regards to the COVID-19 pandemic and social unrest, the country’s key performance indicators suggest that the economy is most likely to rebound in the coming year, 2022. Though the economy will not operate at its full scale, the possibilities of sectorial development remain optimistic.
Addressing constraints to growth in specific markets is to be one of the critical areas where the government can concentrate its effort towards sustaining its economic viability during and post COVID-19.
SARFED stated that the government can either start by addressing problems related to how supply chains function, including infrastructure, access to finance, human resources, and the connection between the parts of the supply chain. These must be sustainable among key sectors such as manufacturing and agriculture. This will not only boost the Gross Domestic Product (GDP) of the country but it will also boost the economic transformation especially at the sector level whose ripple effect was an increase in employment.
The country is expected to rebound in its economic performance by not less than 1.6 percent with possible prospects of increasing trade on the international market. In achieving this, SARFED said the government will have to focus on finding sustainable alternative means of engaging the private sector who will also help in being innovative for inclusive economic development.
According to the World Bank report, Sub-Saharan Africa GDP is to grow by 3.3% this year, with a projection of about 3.5% in 2022 based on the condition of rising commodity prices, the lifting of some anti-coronavirus restrictions as well as a pick-up in global trade.
While the government has relaxed the COVID-19 restrictions by gradually reopening several economic activities, after an entangled effort of engagement in public vaccination campaigns, the pace of economic recovery has remained slow. However, there is concern that continued threats posed by variants of the coronavirus such as Delta variant may leave African nations, including Eswatini trapped in cycles of on-off lockdowns which would then result in economic failure again in 2022 despite positive growth projections of 2.2 percent.
The growth is projected to pick up in the second half of the year, driven by domestic demand and commodity exports, especially on SACU receipts. Household consumption will contribute significantly to growth as the economy opens up and exceptional savings last year are spent at least partially. Private investment will progressively strengthen.
International trade linkage
Eswatini will recover competitively in its economic position in the region by establishing strategic trade linkages with some of the fasted recovering economies such as Angola, Nigeria, and South Africa. This is due to the observations made by the International Monetary Fund. In its April report of 2021 which indicates that these, three African countries are likely to recover from the recession caused by COVID-19 towards the end of the year 2021. These include Angola and Nigeria at 2.4 percent, and South Africa, at 4.6 percent respectively.
Challenges
SARFED noted that Eswatini’s economic outlook is still faced with the challenge of rising inflation and climate change which particularly affected the agriculture sector with a reduction in food security.
According to the integrated food security phase classification report in support of the World Food programme report of 2021, between January and March 2021, over 347,000 people (31% of the population) were expected to have experienced high levels of acute food insecurity and required urgent humanitarian assistance.
Enabling environment
Government plays a central role in supporting economic growth and reducing poverty. SARFED notes that government needs to provide good policy, strong institutions, and efficient public goods and services to ensure the private sector can thrive and the benefits of growth reach all citizens.
As well as developing policies that promote growth, governments must also commit to developing and sustaining the institutions that implement, oversee and regulate those policies. This is the enabling environment that encourages the private sector to invest. The vast majority of constraints to growth identified by the private sector are directly linked to government decisions and action especially during and after the pandemic of COVID-19. The government’s policy and legislative decisions determine to a large degree the scale and quality of economic growth and the private sector’s role in it. Therefore, the model of an open, export-orientated economy with a flourishing private sector has the potential to give Eswatini the best chance of increasing prosperity and living standards.
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