Today’s current account data release by the South African Reserve Bank shows that during the first quarter of 2021, South Africa’s current account recorded its fourth surplus since the first quarter of 2020 (with a deficit having been recorded only during Q2 2020). The latest surplus, which is also the second largest recorded, widened from R198 billion in the final quarter of 2020 to R267 billion. Relative to GDP, the current account surplus widened from 3.7% in the fourth quarter of 2020 to 5% in the first quarter of 2021.
An increase in South Africa’s trade surplus from R425 billion in the fourth quarter of 2020 to R430 billion in the first quarter of 2021 supported the rise in the current account surplus. The improved quarterly trade surplus came on the back of the country’s merchandise exports value increasing to a new all-time high, while the increase in the value of merchandise imports was lower. The higher value of merchandise exports was attributed to increased prices, while that of merchandise imports to increased volumes. The rise in export volumes was to be expected as the improving local economy is leading to increased demand.
Further enhancing the quarterly current account surplus was the substantial narrowing of the deficit on the services, income and current transfer account from R227 billion in the fourth quarter of 2020 to R163 billion in the first quarter of 2021. As a ratio of GDP, the shortfall on the services, income and current transfer account narrowed from 4.2% to 3.1%. This reflected a significant narrowing of the deficit on the income account, together with a slight narrowing of the deficit on the services account. Meanwhile, net current transfer payments remained about the same. The narrowing of the deficit on the income account in the first quarter of 2021 follows a significant widening of the account in the final quarter of 2020 (albeit from an extremely low base) due to a noticeable increase in gross dividend payments and a slight decrease in gross dividend receipts. The first quarter’s results were likely the outcome of improved gross dividend receipts relative to gross dividend payments due to the improvement in the global economy.
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