The Impact of Current Account Balance on Economic Growth in South Africa

Abstract

This study investigates the impact of South Africa’s current account balance on its economic growth from Q1 2015 to Q4 2022 using Auto Regressive Distributed Lags (ARDL) technique. This study incorporates qualitative variables like COVID-19 to understand its effect on the South African current account and economic growth rate. Generally, the results show that the South African current account deficit impacted economic growth in both the long and short run. COVID-19 also affected the current account significantly in both the long and short run, thus causing more deterioration on the South African current account and subsequently affecting the economic growth rate negatively. This study recommends more competitive export promotion and import substitution by investing in and developing domestic productivity. This study also recommends an acceleration of the tabled COVID-19 recovery initiatives through an alliance between the government and private sector.