South Africa recorded its first current account surplus in 17 years in the first quarter of 2020 because of a trade surplus of around R208bn. Essentially, a trade surplus shows the difference between imports and exports. A surplus indicates that a country is exporting more than it is importing, or earning more than it is spending.
Economic theory posits that a weakening currency can eventually lead to a higher level of exports, given that these exports are relatively cheap for foreigners with stronger currencies, and lower levels of imports. In theory this is positive as it supports economic activity and growth in a country which in turn has a positive impact on employment, wealth creation, and will even support the country’s currency over time.
A country where this occurred in recent years is South Korea. After being bailed out by the IMF in 1998, South Korea went on to turn its economy into one of the leading manufacturing and exporting countries globally, transforming – and importantly, reforming – from a state of bankruptcy to economic prosperity in less time than SA has been a democracy.
Denne historien er fra 30 July 2020-utgaven av Finweek English.
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Denne historien er fra 30 July 2020-utgaven av Finweek English.
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