SA current-account gap beats forecasts on dividend payout

South Africa’s current-account deficit widened more than expected in the fourth quarter of 2023 due to dividend and interest payments.

The overall balance on the current account, the broadest measure of trade in goods and services, expanded to an annualised deficit of 2.3% of gross domestic product, or R166 billion ($8.8 billion), from a revised 0.5% of GDP in the prior quarter, the South African Reserve Bank said in a statement on Thursday.

The median estimate of eight economists in a Bloomberg survey was for a shortfall of 1.2% of GDP. South Africa has now posted a current-account gap for a seventh straight quarter.

The deficit meant the full-year shortfall was 1.6% of GDP, the deepest in four years.

The worse-than-expected quarterly deficit was largely driven by a bigger shortfall on the services, income and current transfer account of R253.7 billion in the fourth quarter, compared R215.4 billion in the prior three months.

That increase stemmed from a larger deficit on the primary income account due “to higher dividend payments by companies across the board,” the central bank said. Outflows in the account were the largest since the second quarter of 2022.

The rand extended gains after the data was released to trade almost 0.3% stronger against the US currency. It was quoted at R18.78 per dollar at 13:56 p.m. in Johannesburg.

Key insights

• Trade surplus narrows to R88.1 billion in the fourth quarter from R181.1 billion in the prior three months
• Trade surplus shrank due to value of merchandise imports increased more than that of goods exports, contributing to the full year figure shrinking to 1.5% of GDP from 3.4% of GDP in 2022
• Terms of trade including gold deteriorated further in the quarter as the rand price of imported goods and services increased more than that of exports
• Terms of trade on annualised basis also deteriorated on the back of increased prices of imports

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