South Africa’s current account deteriorates further in 2023 while tourism continues to recover

SOUTH AFRICA - Report 08 Mar 2024 by Iraj Abedian

Data released by the South African Reserve Bank indicates that the deficit on South Africa’s current account widened markedly, from R34.4 billion in the third quarter to R165.5 billion in the fourth quarter of 2023. As a ratio of GDP, the current account thus widened to a deficit of 2.3% in the fourth quarter of 2023 from 0.5% in the third quarter. On an annual basis, the current account balance went to a deficit of R112.5 billion in 2023 from a deficit of R30.0 billion in 2022, translating to 1.6% from 0.5% as a ratio of GDP.

South Africa's trade surplus contracted from R181.1 billion to R88.1 billion in the fourth quarter of 2023, primarily due to a greater increase in the value of merchandise imports compared to goods exports. This rise in imports and exports of goods and services was driven by both higher volumes and prices. Over the course of 2023, the trade surplus decreased to R103.5 billion from R224.2 billion in 2022, representing 1.5% of GDP from 3.4% of GDP.

In the fourth quarter of 2023, the deficit on South Africa's income, service and current transfer account expanded from R215.4 billion to R253.7 billion. The widening deficit was mainly driven by a larger shortfall on the primary income account, despite narrower deficits on the services and secondary income accounts.

The improved services account likely benefited from the continued improvement in tourism in South Africa. From the second quarter of 2020, partly on account of the COVID-19 restrictions on foreign tourists into the country, there was a large gap between services payments and receipts. This led to a sustained and larger shortfall on the services account than before the COVID-19 pandemic. However, data from Statistics South Africa (Stats SA) indicate tourist arrivals in South Africa exhibiting a positive trajectory, with consistent increases observed month on month between 2021 and 2023. As global tourism rebounds, South Africa is experiencing a similar upward trend.

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