In April 2012, South Africa’s trade balance recorded a much larger than expected deficit of R9.9bn. This was well above expectations for a deficit of R4.0bn, although the survey was based on a very small sample size. This is the fourth consecutive monthly trade deficit, although the data remains extremely erratic from month to month.
During the month, the value of exports slumped by a very discouraging 14.9%m/m to R52.2bn (down a massive R9.16bn in the month). Imports also fell during the month, down 7.2%m/m or R4.8bn. The decrease in exports was broad-based and included a 16% decline in mineral products, a 23% fall-off in exports of precious and semi-precious stones and metals, a 11% drop in base metals exports, a 14% slump in machinery and electrical appliances and a 10% decrease in vehicles exports.
The SA trade data remains extremely volatile month by month. However, on a trend basis, the trade balance moved from a persistent and large deficit in 2006 to 2009 to a regular trade surplus in 2010/2011. In recent months, the trade balance has reverted back to an increasingly significant deficit.
In general, South Africa’s exports are clearly under increasing pressure, reflecting the sluggish global economic environment, especially the return to recession conditions in the Euro-area (see chart attached).
Looking forward, the sluggish nature of the world economy (including the recent fall-off in global commodity prices), suggests that South Africa is going to struggle to maintain export performance, despite the somewhat weaker Rand. Correspondingly, South Africa’s trade balance is likely to record a more persistent deficit. Crucially, while the increase in the trade deficit will dampen GDP growth estimates, we don’t expect the deficit to reach levels recorded in 2007 (see chart attached). This implies that although the current account will experience some increased pressure over the coming 12 months; the deterioration in the current account should remain fairly manageable at less than 5% of GDP.
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