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A surprise trade surplus in August bodes well for SA’s current account.
A surprise trade surplus in August bodes well for SA’s current account.

Surprise trade surplus lifts SA’s outlook

ECONOMIC NEWS

By Sunita Menon - Oct 1st 2018, 08:37

A surprise trade surplus in August bodes well for SA’s current account. 

After July’s revised deficit of R5.29bn from R4.65bn, SA saw a surplus of R8.79bn in August, data from the SA Revenue Service (Sars) showed on Friday.

This is a stark contrast to the R1.8bn deficit expected by economists polled by Bloomberg. August also typically delivers a large deficit, which has averaged R5.6bn over the past seven years.

The numbers are notoriously volatile, but analysts say the trend points to a trade surplus for the year. A trade surplus eases pressure on the rand and SA’s current account.

"Hidden behind the major movements there is more evidence of the lagged impact of the weaker rand exchange rate on the trade account, with higher imports ... evident across many smaller sectors," said NKC economist Elize Kruger.

The rand has lost 14% against the dollar this year, which has raised the costs of imports.

The balance of trade indicates the difference in value between a country’s imports and exports. The current account is indicative of SA’s trade with the rest of the world. Compared with recent years, the deficit has narrowed significantly. The current account deficit averaged more than 5% of GDP between 2012 and 2015.

Data in September showed SA’s current account deficit narrowed in line with expectations in the second quarter of 2018 to 3.3% of GDP.

"The outlook for trade in 2018 still remains relatively favourable, though global trade conditions are showing signs of early weakness that may impact on exports."

"On the domestic front, some recovery in demand will keep import growth positive but modest," said Nedbank economist Isaac Matshego.

Import growth will be underpinned by the modest rebound in consumer spending, while the weaker rand exchange rate and higher international oil prices will raise the value of imports of mineral products, he said.

President Cyril Ramaphosa has revealed actions to reform legislation and regulations such as the Mining Charter and the rollout of broadband spectrum as part of his economic stimulus plan to reignite growth and foster investment.
Business Live 

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

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