JOHANNESBURG: South Africa’s trade surplus grew sharply in March as commodity exports jumped on the back of strong global demand, raising the chances it will be able to narrow the current account deficit, which is seen as a key economic weakness.
The treasury has an ambitious target to trim the current account deficit to around 3% from 4% of gross domestic product last year.
Economists said the trade data put that within reach, which might help avert further cuts to South Africa’s credit ratings, although economic prospects overall remained subdued.
“We’re already well ahead on last year’s figures and at this rate it looks like a current account deficit of about 3% is not impossible,” said Nedbank chief economist Dennis Dykes.
“A year ago people saw that as fairly unlikely. So if this continues that’s very, very good news.”
Data from the South African Revenue Service (SARS) on Friday showed the trade account rose to an R11.44-billion surplus from a nearly R5-billion surplus in February, with exports up 16%. Imports were up 8.9%.
Sales of precious metals climbed 33% in the month, followed by a 27% increase in exports of machinery and a 19% rise in sales of vehicles.
South Africa lost its investment-grade ratings from S&P Global and Fitch earlier this month, after President Jacob Zuma fired Pravin Gordhan as Finance Minister a midnight Cabinet reshuffle.
A fall to “junk” grade usually pushes up borrowing costs. Both ratings firms said the downgrades could hamper treasury plans to cut spending and reduce the budget and current account deficits which have swelled as anaemic economic growth reduces tax revenues.
In March the central bank said it estimated the economy would grow 1.2% in 2017, but said after the ratings cuts it would probably have to lower the estimate as the downgrades blocked investments into the economy.
