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South Africa trade

Since When Does an Improvement in the Trade Balance Signal Economic Recovery?

Sandeep Mahajan's picture

Something is  not quite right with this picture.

There has been somewhat of a celebration lately in the South African press and markets, sparked by news that the external trade balance was moving into positive territory following several months of trade deficit.

The fact that three consecutive months of trade surplus (May-July 2009) were recorded for the first time in 6 years has made it even more special. Market analysts have exulted that “South Africa's economy was likely to recover as the balance of trade improved," [which] "underscores our bullish outlook for the current account deficit." The positive mood further whetted the appetite of foreign investors, who have poured more than $7 billion into the Johannesburg Stock Exchange in 2009 thus far, bolstering the Rand to a one-year high against the US Dollar by end-August.