PRETORIA (Reuters) – South Africa’s current account deficit narrowed to its lowest in nearly a decade in the last quarter of 2019 as Africa’s most industrialised economy recorded a significantly higher trade surplus, central bank data showed said on Thursday.
The current account deficit narrowed to 1.3% of gross domestic product (GDP) in the fourth quarter of 2019 from a shortfall of 3.7% in the third quarter.
The deficit was the lowest since a small surplus of 0.4% in the final quarter of 2010, and well shy of the 3.5% shortfall for the quarter forecast by economists surveyed by Reuters.
The trade balance showed a wider surplus of 102.5 billion rand ($6.68 billion) in the fourth quarter, more than double the revised 44 billion rand surplus in the previous three months.
The central bank said the marked improvement in the trade balance was due to an increase in the value of merchandise exports against a decline in imports, allowing for a rise in both prices and volumes at a time when the rand weakened substantially against the U.S. dollar.
Net gold exports rose, from 70 billion rand to 93 billion rand in the fourth quarter, while the balance of services, income and current transfers, which includes portfolio investments, also improved, to a narrower 171 billion rand deficit from a 232 billion rand gap previously.
The current account, a measure of transactions of goods, services as well as primary and secondary income, has long been a sore spot for the country as the balance of payments exposed the dearth of real investment, drawing criticism of government’s economic management.
Increasing borrowing over the last decade due to persistently weak growth has led to a sharp increase in public debt, north of the 60% to GDP ratio seen as red line by credit ratings agencies, leaving the country heavily reliant on typically volatile portfolio flows.