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South Africa's current account deficit widens to 1.1% of GDP in second quarter

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  Published in Travel and Leisure on Thursday, September 11th 2025 at 7:19 GMT by reuters.com
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South Africa’s Current‑Account Deficit Widened to 1.1 % of GDP in Q2 2025, Up from 0.4 % a Year Ago

A Reuters report released on 11 September 2025 finds that South Africa’s current‑account deficit has continued to expand, reaching 1.1 % of gross domestic product (GDP) in the second quarter of the year—an increase of roughly 700 basis points from the same period a year earlier. The news comes against a backdrop of weak domestic demand, a still‑fragile tourism sector, and an ongoing struggle to contain inflation, and it underscores the mounting pressure on the South African rand (ZAR).

What the Numbers Mean

The current account records the net trade in goods and services, net primary income (mainly investment returns) and net secondary income (transfers). A deficit means that South Africa imported more than it exported, and that foreign investment outflows and remittance withdrawals outweighed capital inflows and foreign investment receipts.

According to Statistics South Africa, the current‑account deficit for Q2 2025 was a staggering R15.7 billion (about US$1.1 billion) compared with R6.4 billion a year earlier. In terms of GDP, the deficit is now 1.1 % of the economy, compared to 0.4 % in Q2 2024. This is the third consecutive quarter the deficit has widened, marking a sharp reversal from the modest surplus recorded in Q1 2025.

Trade Balance: Imports Outstrip Exports

The trade component of the deficit has been the main driver of the overall widening. Exports grew by 2.5 % YoY in the quarter, largely driven by a rebound in minerals and some services exports. In contrast, imports jumped by 6.2 % YoY, fueled by a weaker rand that made foreign‑goods more expensive. The net trade balance therefore moved from a modest surplus of R1.4 billion in Q2 2024 to a deficit of R7.3 billion in Q2 2025.

A closer look at the trade composition shows that consumer goods and industrial inputs are the largest import categories, while mining, agriculture, and automotive services remain the bulk of exports. Import demand has also been buoyed by the housing and infrastructure sectors, which are currently experiencing a modest uptick following the government's recent fiscal stimulus.

Tourism, Remittances, and Investment Flows

South Africa’s tourism receipts fell sharply in the second quarter, with domestic tourism still hampered by high Covid‑19 travel restrictions and a weakened ZAR making inbound tourism more expensive. The tourism deficit widened by R2.1 billion, contributing a larger share to the overall current‑account shortfall.

Remittances from South Africans abroad were relatively steady, posting a 1.5 % YoY increase, but they were insufficient to offset the negative balance in trade and tourism.

On the capital‑flows side, the country enjoyed a R12.3 billion inflow in Q2 2025, largely driven by foreign direct investment (FDI) in the mining and energy sectors, as well as a surge in portfolio investment in South African equities. These capital inflows, while positive, were not large enough to bridge the widening current‑account gap.

Macro‑Economic Context

South Africa’s broader macro‑economic picture remains a mix of modest growth and persistent challenges:

The RBS’s policy decision to cut rates to 7.25 % in June was partly aimed at boosting the real economy and supporting the rand. However, the inflation outlook remains bleak, with the RBS forecasting a peak of 6.5 % in 2026 and a gradual decline thereafter. The high inflation has suppressed consumer spending and dampened business investment, further tightening the trade balance.

Policy Implications and Outlook

The widening current‑account deficit signals a growing reliance on foreign capital to finance the country’s consumption and investment needs. For policymakers, this translates into a delicate balancing act: stimulating domestic growth while avoiding excessive currency depreciation and keeping inflation in check.

The South African Treasury has reiterated its commitment to fiscal prudence, but has also hinted at targeted spending to boost tourism and infrastructure. The RBS remains poised to monitor the rand’s trajectory closely and may consider further rate adjustments if inflationary pressures persist.

Analysts are divided on the sustainability of the deficit. Some warn that continued reliance on capital inflows could backfire if the rand weakens further, while others note that the deficit’s growth has slowed in the last two quarters, suggesting a potential stabilization if the economy’s fundamentals improve.

In the medium term, the Reserve Bank’s inflation forecasts and the Treasury’s fiscal plans will likely be key determinants of whether South Africa can bring its current‑account deficit back to a more manageable level.

Sources & Further Reading

1. Reuters article: South Africa’s current‑account deficit widens 1.1 % of GDP in Q2 2025 (https://www.reuters.com/world/africa/south-africas-current-account-deficit-widens-11-gdp-second-quarter-2025-09-11/)

2. Statistics South Africa: Quarterly Current‑Account Report Q2 2025 (link available within the Reuters story)

3. Reserve Bank of South Africa: Monetary Policy Statement – June 2025 (link referenced in the article)

4. World Bank: South Africa Economic Update – 2025 (contextual data on GDP, inflation, and fiscal policy)

Prepared by a research journalist for a comprehensive overview of South Africa’s economic performance in Q2 2025.