Kingdom of Swaziland - Staff Monitored Program-Staff Report; Staff Supplement (Electronic book text)

1. The Swaziland economy continues to suffer from the global economic crisis and an overvalued real exchange rate. Real GDP growth recovered to an estimated 2 percent in 2010, on the back of a moderate recovery in South Africa. Swaziland, however, continues to be the worst performer in the SACU region, partly reflecting an overvalued exchange rate and the heavy toll of HIV/AIDS on human capital (Figure 1). The large fiscal adjustment in 2011 is projected to dampen real GDP growth to about 0.5 percent. Inflation moderated in 2010, notwithstanding the increase in fuel prices in November 2010. It is, however, expected to rise to about 8 percent in 2011, as higher taxes and the increase in international food and fuel prices pass through to higher consumer prices. The real effective exchange rate appreciated by 5.1 percent in the twelve months to December 2010 (Table 1).