South Africa’s Record Current-Account Surplus Misses Estimates

(Bloomberg) -- South Africa's current-account surplus for the second quarter missed estimates even as it widened to a record amid improving economic activity and growing exports following the easing of restrictions to curb the spread of Covid-19. 

The balance on the current account, the broadest measure of trade in goods and services, widened to an annualized surplus of 5.6% of gross domestic product, or 342.8 billion rand ($24.2 billion), from a revised 4.3% positive balance in the previous quarter, the South African Reserve Bank said in a report on Thursday. While that's the largest quarterly current-account surplus on record, it's still less than the 6.7% median estimate of 13 economists in a Bloomberg survey.  

Significant revisions to first-quarter data follow recent changes to the way that statistics authorities calculate GDP data, the central bank said in an emailed response to questions. 

Key Insights

• The smaller-than-anticipated surplus on the current account could weigh on the rand, which has gained 3.8% against the dollar since the beginning of the year. Persistent current-account deficits, together with a budget shortfall, which the Treasury sees at 9.3% of GDP for the fiscal year through March 2022, have been key risks for South Africa in the past as they make the country vulnerable to external shocks.
• The positive balance was mainly driven by an annualized trade surplus that widened to record high 613.7 billion rand. The value of merchandise exports rose to 1.8 trillion rand from 1.6 trillion rand in the first quarter, pushed up by higher volumes. The value of merchandise imports grew to 1.3 trillion rand from 1.27 trillion rand.
• The deficit on the services account, where tourism income makes up a large part, narrowed to 66.3 billion rand from 71.6 billion rand. While South Africa has reopened its international borders to business and leisure travelers, the tourism industry is still reeling from the virus-induced disruptions. Data for the three months through September is likely to show that a return to strict lockdown measures to curb a third wave of infections weighed on domestic tourism.
• The quarterly shortfall on the nation's primary-income account, which reflects outflows due to dividends and interest payments to foreign shareholders, widened to 168.9 billion rand from 63.1 billion rand.

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