South Africa posted its first current account deficit in three years in 2022 as imports rose and power shortages and restrictions on the logistics network curbed exports, making the country more vulnerable to external shocks.
The current account balance, the broadest measure of trade in goods and services, fluctuated from a surplus of 3.7% in 2021 to a deficit of 0.5% of gross domestic product, or R31.8 billion, according to the South African Reserve Bank. in a report published Thursday.
It is the first annual deficit since 2019 and comes after coronavirus restrictions and global supply chain disruptions suppressed imports.
The current account gap and budget deficit, which the Treasury expects to narrow to 4% of GDP in the fiscal year through March 2024, leave South Africa vulnerable to external shocks amid deteriorating global economic prospects.
In January, the World Bank cut its growth forecasts for most countries and regions and warned that new adverse shocks could push the global economy into recession.
The current account balance in the fourth quarter was an annualized deficit of 2.6% of GDP, or R174 billion, compared to an upwardly revised surplus of R3.1 billion in the previous three months.
The median of nine economists’ estimates in a Bloomberg survey was for a negative balance of 2.5% of GDP.
South Africa’s economy contracted 1.3% in the fourth quarter, with data from statistics agencies showing intense power cuts and declines in mining activity and exports, limiting output growth.
Eskom Holdings SOC Ltd. subjected the country to power cuts, known locally as load shedding, on all but three days during the quarter, while disruptions at the aging rail network and ports of fellow state-owned Transnet SOC Ltd. goods.
The impact of continuous blackouts and shortcomings in the logistics infrastructure was partially offset by the first corona-free summer holiday.
The deficit in the services account, which includes tourism receipts, fell to R85 billion in the fourth quarter, from R108 billion in the previous three-month period. December is traditionally the most popular holiday month in South Africa.
The central bank’s quarterly projection model in January shows that it expects a current account deficit of 1.7% of GDP in 2023.
The current account balance is expected to deteriorate in the short to medium term due to continued restrictions in electricity supply, increased investment in alternative energy solutions that will boost imports and an expected decline in export volumes, Governor Lesetja Kganyago said in a speech at the Reserve Bank’s website Tuesday.
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