Eswatini posts 5.7% growth as trade deficit bites in early 2026

Mbabane – Eswatini’s economy grew by 5.7 percent in the fourth quarter of 2025 compared to the same period in 2024, with the Ministry of Economic Planning and Development reporting broad-based growth across all sectors in its 2026 first quarter Economic Bulletin.

The tertiary sector led the expansion, growing by 9.9 percent, driven by strong consumer demand. The Information, Communication and Technology sector expanded by 16.8 percent, Wholesale and Retail services grew by 15.5 percent, and Financial and Insurance services recorded an impressive 26.5 percent increase. The primary sector grew by 2.6 percent, supported by mining and quarrying, which surged by 6.0 percent on the back of increased external demand for coal. The construction subsector expanded by 11.8 percent, anchored by ongoing public and private sector projects.

Inflation remained contained, averaging 1.9 percent in the first quarter of 2026, down from 2.6 percent in the previous quarter. The Central Bank of Eswatini maintained its accommodative monetary stance, keeping the discount rate at 6.75 percent and the prime lending rate at 10.25 percent.

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Private sector credit grew by 3.3 percent, rising from E22.408 billion in the last quarter of 2025 to E23.151 billion in the first quarter of 2026. Credit to businesses rose by 6.9 percent to E12.668 billion, with manufacturing and construction recording the strongest uptake at 30.5 percent and 22.3 percent respectively. Credit to households rose marginally by 0.4 percent to E9.471 billion.

The Lilangeni strengthened against all three major currencies during the quarter, with the US dollar averaging E16.32 against E17.12 in the previous quarter, the British pound at E22.02 against E22.76, and the Euro at E19.13 against E20.43. The bulletin attributed the currency gains to strong economic performance in South Africa and a weaker US dollar, though risk-off investor sentiment triggered by the Middle East conflict tempered the gains.

However, the bulletin flagged several areas of concern. The country recorded a trade deficit of E20.3 million in the first quarter of 2026, swinging from a surplus of E1.4 billion in the previous quarter. Total merchandise exports reached E10.045 billion while imports stood at E10.065 billion. Exports declined by 20.4 percent compared to the fourth quarter of 2025, with sugar falling by 25.3 percent, textiles by 20.6 percent and miscellaneous edibles by 16.6 percent.

Gross official reserves declined by 17.3 percent on a quarter-on-quarter basis, falling from E11.672 billion to E9.648 billion, covering only 2.2 months of imports, below the internationally recommended threshold of three months.

Government revenue collection also fell short of budget expectations by 9.4 percentage points in the fourth quarter of fiscal year 2025/26, driven by underperformance in VAT, fuel tax, corporate tax and PAYE. SACU receipts declined sharply by 20.4 percent, reflecting a diminished SACU share for the country. On a positive note, VAT collections rose by 30.7 percent, driven by higher gross VAT payments linked to increased consumption.

Capital expenditure surged by 143 percent during the quarter, with major public infrastructure projects including the construction of the Mpakeni Dam, the International Convention Centre and the Large-Scale Irrigation Scheme II (LUSIP II) driving the increase.

The bulletin warned that global risks remain significant, with Middle East tensions driving crude oil prices up 22 percent to an average of $75.75 per barrel, coal prices rising 11.9 percent to US$122.25 per metric tonne, and global growth projections revised downward to 3.1 percent for 2026.