RSA Secures its Place Among the “Fragile Five”

SOUTH AFRICA - In Brief 03 Dec 2013 by Iraj Abedian

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According to a set of figures released today by the South African Reserve Bank, the current account deficit has remained in excess of 5 per cent of the gross domestic product since 2012. This – coupled with a shortfall in the government balance as well as anemic growth – suggests that South Africa has secured its “not-so-coveted” status as a fragile economy. Brazil, India, Indonesia and Turkey are the other members of the “fragile five” emerging market economies. In a rather hushed and hurried bid to portray a more accurate picture of South Africa’s trade flows, the South African Revenue Services – together with the National Treasury, the South African Reserve Bank and Statistics South Africa – decided to include previously omitted trade data between South Africa and the BNLS countries (that is, Botswana, Namibia, Lesotho and Swaziland).  Given that South Africa is a major exporter to these markets, dramatic changes in the trade balance ensued following the revision. For instance, the balance of trade tilted from deficit to surplus in 2010 and 2011. As a result, today’s print of the revised current account figures shows some significant differences. To illustrate, the revised current account deficit for 2012 is 5.2 per cent of GDP (previously 6.3 percent). Nonetheless, the revisions have not helped to arrest the widening trend in the current account deficit. Against this backdrop, South Africa remains vulnerable to swings in investors’ appetite for risky emerging market economies’ assets. The reduction of monetary stimulus in the US will, at some point in time, become a reality. So might be the reversal of capital flows to emerging market economies – particularly the “...