South Africa’s Q3 current account deficit narrows on the back of improved terms of trade

SOUTH AFRICA - Report 05 Dec 2019 by Iraj Abedian

Today the South African Reserve Bank released the latest current account data that shows the country’s current account deficit narrowed in the third quarter of 2019 - falling from R208.7 billion during the second quarter of 2019 to R190.3 billion in the third quarter, a narrowing of R18.3 billion. As a ratio of GDP, the current account deficit improved from 4.1% in the second quarter to 3.7% in the third quarter.

This improvement in the current account balance during the third quarter can be attributed to the trade balance that switched from a deficit of R31.8 billion in the second quarter to a surplus of R41.1 billion in the third quarter. It is encouraging to note that the improved trade balance was actually due to an increase in exports, and not just imports declining at a faster pace than exports, as has been the case in previous periods. Both the volume and price of merchandise exports went up, thus resulting in the increased total value of exports. At the same time, the total value of imports declined as both volumes and prices softened.

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