South Africa slumps into a deficit
South Africa’s current account slumped to a deficit in the second quarter as the nation’s trade surplus narrowed sharply and the value of imports increased more than that of exports amid fallout from the Iran war.
The balance on the current account—the broadest measure of trade in goods and services—turned to a deficit of 2.6% of gross domestic product, or R205.5 billion, from a surplus of 2.3% in the previous quarter, the South African Reserve Bank said in a report on Thursday.
The shortfall was much higher than the median estimate of seven economists surveyed by Bloomberg, who forecast a smaller gap of 1.3% of GDP.
The quarterly deficit as a percentage of GDP was the largest since the third quarter of 2019, the central bank data showed.
The deterioration was driven by the trade surplus, which narrowed sharply to R146.4 billion from R428.8 billion in the first quarter.
During the period, the value of merchandise imports rose more than merchandise and gold exports, the Reserve Bank said.
The value of exports of goods and services increased by R92.3 billion in the quarter, reflecting higher prices and volumes, while the value of imports rose by R376.6 billion due to increases in both volumes and prices, it said.
The larger-than-anticipated deficit on the current account coincides with the first full quarter to reflect the impact of the Iran war, which began when the US and Israel attacked the Islamic Republic on 28 February.
The conflict has constrained traffic through the Strait of Hormuz, a key trade artery, sending the price of oil and fertiliser soaring.
Data published earlier this week showed South Africa’s economy posted a larger-than-expected contraction of 0.2% in the three months through June, breaking a growth streak of six consecutive quarters that had been buoyed by exports.
South Africa’s terms of trade also deteriorated in the three months through June, hurt by the rand price of imports increasing more than that of exports.
The shortfall on the services, income and current transfer account widened to R351.9 billion from R247.2 billion.
As a ratio of GDP, the deficit on that gauge widened to 4.5% from 3.1% in the first quarter, marking the largest gap since the second quarter of 2022.
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