South Africa’s current account deficit narrowed to ZAR -57 billion in Q4 2025, a marked improvement from the prior quarter’s -ZAR 82.80 billion but still elevated relative to the 12-month average of -ZAR 53 billion. This reflects a partial recovery from the sharp deficits seen in early 2024, notably the -ZAR 165.50 billion in Q1 2024. The improvement is driven by stronger export performance and a moderation in import demand amid tighter domestic financial conditions.

Drivers this month

• Commodity exports rose 4.50% QoQ, buoyed by higher platinum and gold prices.
• Import volumes contracted 2.10%, reflecting subdued domestic consumption.
• Net income outflows remained stable at -ZAR 12 billion, unchanged from Q3 2025.

Policy pulse

The current account deficit remains above the South African Reserve Bank’s comfort zone, which targets a sustainable deficit below 3% of GDP. At approximately 3.50% of GDP, the deficit signals ongoing external vulnerability, constraining monetary policy flexibility amid persistent inflationary pressures.

Market lens

Immediate reaction: The ZAR/USD exchange rate strengthened 0.40% within the first hour post-release, reflecting relief over the smaller-than-expected deficit. Short-term government bond yields (R186) declined by 5 basis points, signaling improved risk sentiment.

The current account deficit of ZAR -57 billion in Q4 2025 compares favorably to the previous quarter’s -ZAR 82.80 billion but remains wider than the -ZAR 31.60 billion recorded in Q1 2025. Year-on-year, the deficit is narrower than the -ZAR 70.80 billion posted in Q4 2024, indicating a gradual external adjustment.

Monetary Policy & Financial Conditions

The South African Reserve Bank (SARB) has maintained a cautious stance, keeping the repo rate at 8.25% to balance inflation control with growth support. Tighter financial conditions have dampened import demand, contributing to the current account improvement. However, elevated global commodity price volatility poses risks to export earnings.

Fiscal Policy & Government Budget

Fiscal consolidation efforts have limited the government’s external borrowing needs, indirectly supporting the current account. The budget deficit narrowed to 4.20% of GDP in FY2025, down from 5.10% in FY2024, easing pressure on sovereign risk premiums and external financing costs.

Structural & Long-Run Trends

South Africa’s persistent current account deficits reflect structural challenges, including a reliance on commodity exports and limited diversification. The recent narrowing is encouraging but remains vulnerable to external shocks such as commodity price swings and geopolitical tensions affecting trade routes.

Market lens

Immediate reaction: The ZAR strengthened modestly post-release, while 2-year government bond yields fell 7 basis points, reflecting improved confidence in South Africa’s external position.

Looking ahead, South Africa’s current account trajectory will hinge on global commodity markets, domestic demand, and policy responses. We outline three scenarios:

Scenario Analysis

• Bullish (30% probability): Commodity prices remain firm, exports grow 6% YoY, and import demand stays subdued, narrowing the deficit to below 3% of GDP by mid-2026.
• Base (50% probability): Moderate export growth of 3%, stable import volumes, and fiscal prudence keep the deficit near current levels around 3.50% of GDP.
• Bearish (20% probability): Global demand softens, commodity prices fall 10%, and import recovery accelerates, pushing the deficit above 4% of GDP and pressuring the ZAR.

External Shocks & Geopolitical Risks

Heightened geopolitical tensions in key trade corridors and potential disruptions in China’s demand for South African minerals pose downside risks. Conversely, improved trade agreements with African partners could bolster export diversification.

Financial Markets & Sentiment

Market sentiment remains cautiously optimistic. The ZAR’s recent strength and declining bond yields suggest investors are pricing in a gradual external adjustment, though volatility may rise if global risk appetite shifts abruptly.

South Africa’s current account deficit has narrowed significantly in Q4 2025, signaling a tentative external rebalancing. While the improvement is welcome, structural vulnerabilities and external uncertainties persist. Policymakers must continue fiscal discipline and support export diversification to sustain gains. Financial markets appear to have priced in the recent data positively, but vigilance is warranted given global volatility. The next quarters will be critical in confirming whether this improvement is durable or a temporary reprieve.

Key Markets Likely to React to Current Account

South Africa’s current account data typically influences currency, equity, and bond markets. The ZAR/USD exchange rate is highly sensitive to external balance shifts, while sovereign bonds reflect changes in risk perception. Commodity-linked stocks also react to export performance and global demand trends.

• ZARUSD – Directly impacted by current account shifts affecting currency valuation.
• JSE – South African equities respond to external trade and economic outlook.
• NPN – Naspers, a major South African stock, sensitive to currency and export trends.
• BTCUSD – Bitcoin often reacts to emerging market risk sentiment shifts.
• USDSGD – Singapore dollar pair reflects broader emerging market risk appetite.

Extras: Current Account vs. ZARUSD Since 2020

Since 2020, South Africa’s current account deficits have shown a strong inverse correlation with the ZARUSD exchange rate. Periods of widening deficits, such as in early 2024, coincided with ZAR depreciation exceeding 10%. Conversely, narrowing deficits have supported ZAR strength, as seen in late 2025. This relationship underscores the current account’s role as a key driver of currency valuation and external financing conditions.

FAQ

What is the current account and why does it matter for South Africa?

The current account measures trade balance plus net income and transfers. It signals external sustainability and influences currency and policy decisions.

How does the latest current account reading compare historically?

The Q4 2025 deficit of ZAR -57 billion is narrower than recent peaks but remains above the long-term average, indicating partial improvement.

What are the main risks to South Africa’s current account outlook?

Risks include commodity price volatility, global demand shocks, and geopolitical tensions affecting trade flows and investor sentiment.

Takeaway: South Africa’s current account deficit is improving but remains vulnerable. Sustained export growth and fiscal discipline are essential to stabilize external balances and support the rand.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.