Economy grows 6.1% as fuel prices push inflation up

The Eswatini economy picked up speed in the first three months of 2026, growing by 6.1 percent year on year, even as steep fuel and paraffin price increases pushed consumer inflation to 2.7 percent in May and thinned the country’s import cover to below two months.

The figures are contained in the Central Bank of Eswatini’s Recent Economic Developments report for May and June 2026, compiled by its Economic Policy, Research and Statistics Department.

Seasonally adjusted quarterly gross domestic product expanded by 6.1 percent in the first quarter, up from a revised 5.8 percent in the fourth quarter of 2025. On a quarter on quarter basis, activity grew by 1.1 percent after flat growth of 0.0 percent in the preceding quarter.

Factories and construction lead the rebound

The secondary sector did the heavy lifting, swinging from a revised contraction of 0.4 percent to growth of 13.9 percent and contributing 4.5 percentage points to overall growth.

Manufacturing rebounded to 12.4 percent from a decline of 1.2 percent, driven by higher output in food manufacturing, particularly fruit processing and cocoa, as well as chemicals, wood products, paper products, and textiles and wearing apparel. Non metallic mineral products and fabricated metal products rode on sustained construction activity.

Electricity supply returned to marginal growth of 1.8 percent after contracting 4.2 percent, helped by above average rainfall that supported hydroelectric generation. Water and sewerage rebounded to 8.1 percent from a 7.6 percent decline.

Livestock losses drag agriculture to a standstill

The primary sector grew 2.0 percent, up from 1.6 percent. Mining and quarrying expanded 8.5 percent, lifted by a remarkable 158.8 percent jump in quarry stone production tied to the construction boom. Gold output rose 3.0 percent while coal production fell 6.7 percent as heavier rainfall disrupted operations.

Agriculture and forestry stagnated at 0.0 percent, down from 0.6 percent. Animal production contracted a further 22.1 percent, reflecting the continued toll of foot and mouth disease on livestock. Forestry rebounded to 14.6 percent growth and crop production accelerated to 5.6 percent.

The tertiary sector slowed to 2.8 percent from a revised 9.5 percent, still contributing 1.5 percentage points to growth. Information and communication surged 59.6 percent, accommodation and food services grew 27.2 percent and professional, scientific and technical services expanded 19.4 percent. Wholesale and retail trade contracted 5.8 percent, while financial and insurance services fell 18.1 percent on the back of losses in the value of foreign investment portfolios held by retirement funds and insurers.

Paraffin up by E6.78 a litre

Headline consumer inflation accelerated by 0.7 of a percentage point to 2.7 percent in May, driven mainly by housing and utilities and transport, which added 1.8 and 0.7 percentage points respectively.

The housing and utilities index, which carries a weight of about 27.7 percent in the consumer basket, rose from 4.6 percent in April to 6.6 percent in May. Liquid fuels jumped 24.9 percentage points to 48.2 percent year on year after the Ministry of Natural Resources and Energy pushed illuminating paraffin up by E6.78 per litre to E26.28 per litre, a response to rising global oil costs amid Middle East tensions. Actual rentals for housing climbed 2.5 percentage points to 3.3 percent.

Transport inflation rose 2.3 percentage points to 4.0 percent. Fuel prices grew 14.3 percentage points to 23.2 percent year on year after petrol went up by E2.92 per litre and diesel by E6.40 per litre with effect from 7 May 2026. Air transport services inflation hit 20.8 percent.

Food remained the one bright spot for household budgets, recording deflation of 1.8 percent in May, a third straight month of negative growth, with bread and cereals, oils and fats, and vegetables all cheaper than a year earlier.

Core inflation, which strips out food, auto fuel and energy, rebounded to 2.2 percent from 1.6 percent.

The Central Bank held the discount rate at 6.75 percent and the prime lending rate at 10.25 percent in May.

Reserves slip to 1.9 months of import cover

Provisional data shows gross official reserves fell 7.2 percent month on month and 1.3 percent year on year to E8.1 billion at the end of June, enough to cover 1.9 months of imports, down from 2.0 months in May. The Bank attributed the drop to net Rand outflows from trades with local banks and the settlement of fiscal obligations.

Net foreign assets stood at E6.7 billion at the end of May, down 20.5 percent from the previous month and 10.4 percent lower than a year earlier. The banking industry’s net foreign assets contracted 31.0 percent to E781.1 million, while those of the official sector fell 18.9 percent to E5.9 billion.

Borrowing keeps rising

Credit extended to the private sector reached E23.9 billion at the end of May, up 2.5 percent month on month and 10.6 percent year on year.

Business credit rose 3.2 percent to E13.2 billion, with agriculture and forestry up 12.9 percent, construction up 11.4 percent and distribution and tourism up 6.9 percent. Lending to mining and quarrying fell 3.0 percent. Large enterprises took the bulk of the new money, with credit to them rising 7.3 percent to E9.0 billion, while lending to small and medium enterprises slipped 4.7 percent to E4.1 billion.

Household borrowing rose 1.9 percent to E9.8 billion, with unsecured personal loans up 4.0 percent to E4.1 billion, motor vehicle loans up 0.8 percent to E1.4 billion and housing loans up 0.3 percent to E4.3 billion.

Non performing loans stood at E1.4 billion in May, up 1.4 percent month on month and 7.1 percent year on year, though the NPL ratio eased to 6.93 percent as total loan growth outpaced the rise in bad debt.

Broad money supply closed at E26.5 billion, down 0.7 percent for the month but 11.3 percent higher than a year earlier.

Public debt at E42.1 billion

Preliminary figures put total public debt at E42.1 billion at the end of June, equivalent to 40.4 percent of GDP and up 2.2 percent from E41.2 billion in May.

External debt reached E20.1 billion, or 19.3 percent of GDP, rising 1.0 percent mainly on the slight depreciation of the Lilangeni against the currencies in which the debt is denominated. Domestic debt rose 3.4 percent to E22.0 billion, or 21.1 percent of GDP, after an additional advance of E500 million was extended to Government alongside higher issuance of Treasury bills and privately placed bonds.

Non bank financial institutions hold the largest share of domestic debt instruments at 45.6 percent, followed by commercial banks at 24.8 percent and the Central Bank at 16.9 percent.

Sugar prices still weighing on exports

The trade deficit narrowed marginally to E198.8 million in June from E211.4 million the previous month. Exports fell for a third consecutive month, down 4.6 percent to E3.2 billion and 5.6 percent lower than in June 2025, with the Bank pointing to persistently weak sugar prices as a continuing drag on earnings. Imports also fell 4.6 percent to E3.4 billion, though they were 6.5 percent higher than a year ago.

Soft drink concentrates, the country’s biggest export earner, brought in E1.3 billion, down 5.6 percent for the month. Sugar and sugar product exports totalled E724.8 million, up 6.8 percent month on month on the back of higher volumes to Botswana and the European Union. Textile and apparel exports fell 27.2 percent on lower knitwear consignments to South Africa.

South Africa took 70.6 percent of Eswatini’s exports and supplied 68.4 percent of its imports during the month.

Lilangeni firms

The Lilangeni strengthened against all three major trading currencies in June, averaging E16.40 to the United States Dollar from E16.50 in May, and appreciating 1.7 percent against the Pound Sterling and 1.9 percent against the Euro to average E21.86 and E18.89 respectively.

The Bank credited the Rand’s resilience partly to the United States Federal Reserve’s decision to hold its policy rate, and noted that regional markets stayed calm ahead of planned protests against undocumented immigrants in South Africa following assurances from President Cyril Ramaphosa that demonstrations must remain within the law. Uncertainty around the Strait of Hormuz remains a key risk as negotiations between the United States and Iran move slowly.