South African current-account deficit narrows more than expected
South Africa’s current-account shortfall narrowed more than expected in the first quarter, as the value of gold and merchandise exports increased.
The deficit in the current account, the broadest measure of trade in goods and services, shrank to an annualised 1% of gross domestic product, or R66.2-billion, from a revised 2.3% of GDP in the prior quarter, the South African Reserve Bank said in a statement Thursday. The median estimate of 12 economists in a Bloomberg survey was for a gap of 2.8% of GDP.
South Africa has now posted a current-account gap for a fourth straight quarter. The central bank in May revised its estimates upwards for a current-account shortfall of 2.5% of GDP in 2023 and 3.1% next year.
The better-than-expected deficit was largely driven by the widening of the annualized trade surplus to R103.2-billion from R34.2-billion in the fourth quarter, the central bank data show. The value of gold exports increased to a nine-quarter high and goods and services to a record, according to its data.
A smaller shortfall on the services, income and current transfer account also contributed to the overall deficit narrowing. It shrank to 169.4 billion rand, from 189.5 billion rand in the fourth quarter, the central bank said.
The data may support the rand, which has remained volatile because of record power outages and angst over South Africa’s relations with Russia. Last month, Africa’s most industrialised nation was accused by the US of trading arms with the sanctioned country, allegations it has denied.
A gap on the current account and a consolidated budget shortfall — the Treasury sees the latter at 4% of GDP for the current fiscal year — are key risks for South Africa because it makes the country vulnerable to external shocks.
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