SA’s current account deficit narrowed significantly in the second quarter bolstered by higher gold prices.
The current account deficit as a ratio of GDP recovered from 1.5% in the first quarter to 0.9% in quarter two, the SA Reserve Bank (SARB) said on Thursday.
The deficit on the current account of the balance of payments narrowed to R64.6bn in the second quarter from a revised R106.9bn in the first quarter.
The trade surplus widened further from R165.8bn in the first quarter of 2024 to R187.4bn in the second quarter as the value of goods exports increased more than that of merchandise imports.
“The increase in the value of exports of goods and services in the second quarter of 2024 reflected higher prices while the increase in imports of goods and services reflected both higher volumes and prices,” the SARB said.
Notably, net gold exports surged 34% quarter on quarter after falling 7.6% in the previous quarter.
Nedbank economists Liandra da Silva and Nicky Weimar said the increase was mainly driven by the gold price, which climbed 4.5% during the quarter as demand for the safe-haven asset increased on uncertainties surrounding geopolitical tensions and the timing of US interest rate cuts. Total exports (including net gold exports) increased by 3.5% in the second quarter after contracting 0.6% in the first quarter.
Merchandise imports rebounded during the quarter, up by 2.6%, after a 4.5% contraction in the previous quarter.
“The significant recovery in the current account is welcomed but does not suggest a turnaround in global and domestic economic conditions. Inflation has continued to ease across the world, but interest rates largely remain elevated, with only a few key economies having cut and by a small margin,” Da Silva and Weimar said.
They expected demand conditions to show more recovery towards the end of the year “as declining inflation and interest rate cuts bolster overall trade”.
However, exports will likely continue to outweigh imports as muted growth and fixed investment activity weigh on domestic demand. We expect the trade account to remain in a surplus, albeit softer, for the remainder of the year.
Nedbank has forecast a current account deficit of 1.2% of GDP for 2024 compared with 1.6% in 2023.
Jee-A van der Linde, senior economist at Oxford Economics, said SA has recorded a deficit on its current account for nine consecutive quarters, and was likely to persist.
Supply-side constraints continued to restrict exports, he said, However, there was “heightened optimism” that more private-public partnerships in rail and port logistics, for example, could alleviate supply-side constraints and help boost export capacity.
“Stimulating demand by unlocking new export destinations or galvanising existing ones could lift exports further,” said Van der Linde.
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