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Trade balance reflects subdued domestic and international economic growth.
Trade balance reflects subdued domestic and international economic growth.

Slow growth expected to knock SA's exports

ECONOMIC NEWS

By Sunita Menon - Jul 1st, 08:15

SA’s trade balance will remain volatile in 2019 as the global growth slowdown takes a toll on the country’s exports. 

In May, SA switched back to a trade surplus of R1.74bn as growth in exports exceeded growth in imports, data from the SA Revenue Service (Sars) showed on Friday. The surplus was attributable to exports of R112.07bn against imports of R110.33bn. Economists polled by Bloomberg expected a smaller surplus of R0.7bn.

While this is an improvement from the surprise April trade deficit, which was revised upwards by R0.1bn to a deficit of R3.53bn, the figures are difficult to predict and economists stress that it is important to look at longer-term trends.

The balance of trade is an indicator of the difference in value between a country's imports and exports. The current account reflects the country's trade with the rest of the world.

May’s surplus is a deterioration from the R4.76bn surplus recorded in May 2018.

The relatively contained surplus in May reflects subdued domestic and international economic growth.

“With escalating trade tensions, the synchronised global economic moderation is expected to become more entrenched, signalling that export demand could take some strain during the remainder of 2019,”NKC economist Jacques Nel said.

The World Bank recently downgraded its 2019 world growth forecast to 2.6% from 2.9% previously, with rising trade barriers posing a downside risk.

While trade tension between the US and China have cooled in the past week after US President Donald Trump lifted a ban on American companies selling parts to Huawei, a resolution still has not been reached.

This is expected to impede international trade and investment, Investec economist Lara Hodes said.

Energy insecurity in SA, following the worst bout of load- shedding the country has seen in the first quarter of the year, has also hurt the outlook for exports.

SA’s economy took a knock with a steep contraction in the first quarter, which has seen growth forecasts for the year revised down, placing further pressure on an already constrained consumer.

“Import growth is likely to remain restricted in the near term, hindered by weak domestic consumption, underpinned by a highly constrained consumer and lacklustre fixed investment rates stifled by muted business confidence,” she said.

For the year, the cumulative trade deficit of R6.05bn is an improvement from the R12.08bn deficit for the same period in 2018.Business Live  

Read more about: trade | sa economy | imports | exports

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