Fall in S. Africa’s current account deficit not as good as it looks

The narrowing in South Africa’s current account deficit in Q1 is welcome insofar as it has been one of the country’s key vulnerabilities over the past couple of years. But the narrowing was due to a collapse in repatriated profits for foreign-owned companies, which is a reflection of a weak domestic economy rather than an improvement in external competitiveness. Looking ahead, a possible resolution to the strikes that have held back output in the mining sector should help to narrow the trade deficit but, even so, the overall current account balance looks set to remain a source of weakness for some time to come.