Q3 current account balance rebounds, as foreclosure restrictions relax
Export volumes increased in the third quarter, according to data from the SA Reserve Bank.
- The current account balance for the third quarter improved to a surplus of 5.9%, according to data from the Reserve Bank.
- This is partly attributed to the rebound in export volumes during the quarter, South Africa’s trade surplus more than six-fold.
- The current account had registered a deficit of 2.9% in the second quarter.
The current account balance returned to a surplus in the third quarter, as export volumes and economic activity improved with the easing of foreclosure restrictions, according to data from the SA Reserve Bank (SARB).
The current account balance is the difference between credits – exports and receipts – and debits – imports and income payments. It is considered an indicator of the health of the economy. The balance of payments is a statistical summary of transactions between residents and non-residents during a given period.
The current account balance of the balance of payments for the third quarter, released by the SARB on Thursday, recorded a surplus of Rand 297.5 billion, compared to the deficit of Rand 123.7 billion for the second quarter. “[This is] more than four times the size of the previous largest surplus, recorded in the first quarter of 2020, “said the SARB.
Relative to GDP, the current account balance recorded a surplus of 5.9%, an improvement from the deficit of 2.9% recorded in the second quarter.
The trade surplus for the quarter also more than six-fold, rising from R71.4 billion in the second quarter to R453.6 billion in the third quarter.
“The improvement in the trade balance results from the substantial increase in the value of merchandise exports relative to imports. The higher value of merchandise exports results mainly from higher volumes while merchandise imports reflect an increase in exports. price, “says the SARB report.
The terms of trade deteriorated slightly, however, as the rand price of imports rose above that of exports, SARB said.
In a note released ahead of the SARB data release, FNB economists expected the “resilient” trade balance to strengthen the current account balance. They also expected the improvement in GDP for the third quarter, which is 13.5% on a quarterly seasonally adjusted rate, to have a positive impact on the current account-to-GDP ratio.
Investec, however, expected the deficit to widen to 2.5% of GDP – it expected the deficit in the services, income and current transfers account to offset the trade surplus.
However, the deficit of the services, income and current transfers account to GDP narrowed to 3.1%, from 4.5% in the second quarter. “The decline in the deficit can be attributed to a significantly lower deficit in the income account and a slightly smaller deficit in services, partially offset by larger net current transfer payments,” said the SARB.