South Africa beats estimates

South Africa’s current account deficit narrowed more than expected in the second quarter as the rand price of exported goods and services increased more than that of imports.

The gap in the current account, the broadest measure of trade in goods and services, shrank to an annualized 0.9% of gross domestic product, or R64.6 billion, from a revised 1.5% of GDP in the prior quarter, the South African Reserve Bank said in a statement Thursday.

The median estimate of nine economists in a Bloomberg survey was for a gap of 1% of GDP.

The annualized trade surplus widened to R187.4 billion from R165.8 billion rand in the first quarter, central bank data show.

The slimmer-than-anticipated deficit was also driven by a smaller primary income account shortfall, the Reserve Bank said.

The better-than-expected data may support the rand, which has been the best-performing currency in Africa against the dollar in the last three months.

The rand has been on a tear because of investor optimism that a multiparty government formed after the African National Congress lost its national majority in May 29 elections will accelerate reforms to boost economic growth, and on expectations that the Federal Reserve will cut rates this month.

Still, the country’s ninth straight current-account deficit and a consolidated budget shortfall — the Treasury sees the latter at 4.5% of GDP for the current fiscal year — are key risks for South Africa, making it more vulnerable to external shocks.

As is its high debt load, which the International Monetary Fund assesses to be on a non-stabilizing path in the medium term.

South Africa will provide an update on its debt metrics when Finance Minister Enoch Godongwana delivers his mid-term budget on Oct. 30.

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