Merchandise trade deficit spiked to a record $23.3 billion in November, as imports surged at a dramatically faster pace than exports, according to the preliminary estimate released by the commerce ministry on Wednesday.
Having hit a monthly record of $35.7 billion in October, merchandise exports dropped below the $30-billion mark in November, as fresh supply bottlenecks across the globe, including a spike in shipping costs and container shortage, hurt exporters’ ability to ship out.
Nevertheless, exports registered a 26.5% rise in November from a year before and 15.9% from the pre-pandemic (same month in FY20) level. However, imports shot up by 57.2% from the same period last fiscal (albeit on a low base) and 38% from the pre-Covid level. Exports hit $29.9 billion in November, while imports stood at $53.2 billion. Elevated trade deficit may pressure current account, although analysts think it’s not a cause for great concern yet.
Of course, imports were driven partly by a spill-over of pent-up domestic demand that remained mostly muted in the wake of the pandemic. But import bill was greatly inflated by elevated global crude oil prices and massive purchases of coal, cooking oil and gold.
Importantly, if the emergence of a new Covid variant in South Africa spread rapidly to other countries, especially a key market like Europe, the growth momentum, witnessed in merchandise exports in recent months, could come under pressure.
Exports this fiscal have been supported by strong order flow from key markets such as the US and China, thanks to an industrial resurgence there and elevated global commodity prices.
Imports of coal, coke and briquettes jumped 136%, while those of petroleum products shot up by 132%. Edible oil imports rose by 79%, while gold imports continued to rise at a fast pace, by 40%. Of course, base effect, too, remained unfavourable.
However, policy-makers may seek comfort in the fact that trade recovery has taken roots, with merchandise exports having exceeded the pre-pandemic level for nine months in a row. Exports between April and November touched a record $262.5 billion, up 50.7% from a year before and 24.3% from the same period in FY20.
Core export (excluding petroleum and gems and jewellery) rose 22% in November from the same month in 2020 and 2019. Similarly, core import (excluding petroleum and gold) rose 41.5% year-on-year and 42.7% from the pre-pandemic level.