Swaziland is likely to see a rise in protests and demonstrationsagainst the government in the next two years, as frustrations riseamid a poor economic outlook. However, we do not think that thiswill lead to meaningful instability or political reform, as the authoritieswill defy international pressure and continue to crack down onopposition with a heavy hand.
Swaziland's real GDP growth will return to positive territory in 2017on the back of recovering agriculture output, but the good news forthe economy ends there. Weak growth in neighbouring South Africawill weigh on fiscal spending and export growth while higher inflationin Swaziland than in South Africa will erode the purchasing powerof fiscal revenues and exacerbate weak South African demand forSwaziland's exports.
Swaziland's fiscal deficit will remain sizable over the next decadedue to waning Southern African Customs Union revenues. Elevatedfinancing needs will see government debt rise in the years ahead,leading to a significant deterioration in debt sustainability.
Swaziland's current account balance will deteriorate over the nextdecade due to declining Southern African Custom Union receiptsand loss of preferential market access to the US under the AfricanGrowth And Opportunity Act. While external debt will remain low as apercentage of GDP, sovereign risks will rise due to the government'sweakening ability to repay its obligations.