South Africa’s current-account shortfall widened in the second quarter in line with analysts’ expectations, as terms of trade deteriorated and the deficit on its services, income and current transfer account increased.
The deficit on the current account, the broadest measure of trade in goods and services, widened to an annualized 2.3% of gross domestic product, or 160.7 billion rand , from a revised 0.9% of GDP in the prior quarter, the South African Reserve Bank said in a statement Thursday. That matched the median estimate of 12 economists in a Bloomberg survey.
The smaller trade surplus followed an increase in imports and fewer exports. Data from the South African Revenue Service and statistics office showed there was a surge in imports of machinery and equipment – mostly for electricity infrastructure. Households and companies are investing in alternative energy sources because of persistent power cuts by Eskom Holdings SOC Ltd. caused by poorly maintained and aging power stations that aren’t meeting demand.
An economic slowdown in China, South Africa’s biggest trading partner, has also reduced demand for the country’s main export — commodities.A gap on the current account and a consolidated budget shortfall — the Treasury sees the latter at 4% of GDP for the current fiscal year — are key risks for South Africa because it makes the country vulnerable to external shocks.
The central bank in July trimmed its forecasts for the current-account gap to 1.9% of GDP in 2023 and 2.9% next year.
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