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Standard Bank Group
The SA Daily 30 June 2020

Trade deficit likely compressed in May

Shireen Darmalingam

  • World trade in H1:20 fell sharply because of the COVID-19 pandemic. The World Trade Organisation forecasts trade volumes to plummet in 2020 but nevertheless avoid the previous expectation of a 32% contraction for the year. In Q1:20, merchandise trade fell by 3% y/y but, as the pandemic and efforts to contain it intensified during March and beyond, estimates now are for a decline of 18.5% y/y in Q2:20. For 2020, the WTO foresees a world trade contraction of 13.0%.
  • The South African Revenue Service (SARS) will release the May trade balance today. Bloomberg consensus sees the trade deficit as having compressed to R9.8bn, from R35.0bn in April (which was the largest deficit in 30 years). March had posted a surplus of R24.2bn. Exports dropped by 55% m/m, to R53bn in April, while imports fell by 6.5% m/m, to R88bn. Exports of precious metals and stones, mineral products, base metals, vehicles and transport equipment and machinery and electronics declined in April. Imports of textiles, vegetable products, mineral products, textiles, vehicles and transport equipment and original equipment components too declined in April. Strict social distancing measures and restrictions on travel and transport affected trade throughout April and May. However, restrictions were relaxed on 1 June, which should see trade improve in H2:20.
  • The seasonally adjusted goods trade balance improved in Q1:20, which should support the current account (CA). We expect a balanced current account in Q1:20, but are more convinced about a generally small deficit, or even a small surplus, in 2020-2021.
  • The current account balance for Q1:20 will be released on Thursday. Bloomberg consensus sees the CA deficit as having compressed to 0.7% of GDP in Q1:20, from 1.3% of GDP in Q4:19.

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