South Africa recorded a deficit of R7,746-billion for its trade with non-Southern African Customs Union trading partners in July after a deficit of R4,219-billion in June and a shock deficit of R7,005-billion in May, according to customs and excise figures released on Thursday.
The size of the deficit has surprised in recent months. May’s shock figure was the second this year, followed by a third in June, with South Africa recording a record deficit of R7,668-billion in January.
Chris Hart, an economist at ABSA, said: “This trade deficit reflects the imbalances in the economy and the risk for instability in financial markets in future if the deficit doesn’t turn around. Clearly the country needs to boost supply to get the economy back in balance.”
Economist at the Efficient Group, Nico Kelder, said: “It is a shocking number. It indicates that the current-account deficit will be wider than initially expected. This will probably add more fuel to the interest rate fire and also should keep the rand at current levels or even weaker.”
“I can’t say that I’m entirely surprised. It’s probably due to what is referred to as the J-curve effect where rand weakness only has an improving effect on the trade balance in about four to five months’ time,” said George Glynos, market analyst at ETM.
“This data shows that the structural imbalances remain very much intact but suggest that the South African Reserve Bank needs to hike more aggressively than we originally anticipated.” — I-Net Bridge