SA’s cur­rent ac­count deficit widens

The Mercury - - BUSINESS REPORT - Ka­belo Khu­malo

DATA re­leased by the SA Rev­enue Ser­vice (Sars) yes­ter­day showed that the cur­rent ac­count deficit ac­counted for 2.4 per­cent of the gross do­mes­tic prod­uct (GDP) in the sec­ond quar­ter of the year af­ter it widened more than ex­pected in the pe­riod.

Sars said the coun­try’s cur­rent ac­count deficit widened sharply to R110.5 bil­lion in the sec­ond quar­ter from R91.5bn, or 2 per­cent of GDP, in the pre­vi­ous quar­ter.

The of­fi­cial sec­ond-quar­ter deficit data con­trasts with mar­ket ex­pec­ta­tions of a nar­row­ing in the deficit to 1.9 per­cent of GDP.

The tax man said the cur­rent trans­fers deficit rose to R44bn in the quar­ter un­der re­view from R29bn in the first quar­ter on “an in­crease in the amount paid to South Africa’s trad­ing-part­ner coun­tries in the South­ern African Cus­toms Union at the com­mence­ment of the 2017/18 fis­cal year”.

Nar­rowed

Wil­liam Jack­son, a se­nior emerg­ing mar­kets econ­o­mist at Cap­i­tal Eco­nomics, said yes­ter­day that the big pic­ture was that the deficit has nar­rowed sig­nif­i­cantly over the past 18 months and sec­ond-quar­ter wider short­fall was un­likely to pre­vent the Re­serve Bank from cut­ting in­ter­est rates again later this year.

“The break­down of the data showed that South Africa’s trade bal­ance re­mained in a healthy sur­plus. The widen­ing of the over­all cur­rent ac­count short­fall was, in­stead, driven by an in­crease in the cur­rent trans­fer deficit which, in turn, was due to a rise in gov­ern­ment pay­ments,” Jack­son said.

In­creased

In the first half of the year, the cur­rent ac­count deficit nar­rowed to R202bn from R324.2bn in the same pe­riod last year.

The ser­vices gap in­creased to R7.2bn from R 4bn in the first quar­ter, while the in­come deficit went up to R124.1bn from R116.2bn; and the cur­rent trans­fers gap rose to R43.8bn from R28.7bn.

Mean­while, the trade bal­ance sur­plus widened to R64.6bn from R57.4bn in the first quar­ter.

The widen­ing cur­rent ac­count deficit comes on the heels of Sars last week say­ing that the coun­try’s trade sur­plus de­creased to R8.9bn in July from a down­wardly re­vised R10.5bn sur­plus in June, as both im­ports and ex­ports showed sig­nif­i­cant de­clines.

Con­di­tions

How­ever, while the trade sur­plus slid in July, it still beat mar­ket ex­pec­ta­tions of a sur­plus of R5.8bn.

Kamilla Ka­plan, an econ­o­mist at In­vestec, said yes­ter­day that ag­gre­gate global de­mand con­di­tions and com­mod­ity prices had strength­ened, aid­ing South Africa’s ex­port per­for­mance, while weak do­mes­tic con­sump­tion and in­vest­ment de­mand have com­pressed im­port growth.

“These trade dy­nam­ics are ex­pected to per­sist as high-fre­quency global in­di­ca­tors, such as Pur­chas­ing Man­agers In­dexes and global trade, con­firm the strength­en­ing of the global syn­chro­nised re­cov­ery,” said Ka­plan.

“Im­port growth is ex­pected to re­main sup­pressed amid de­pressed con­sumer and busi­ness con­fi­dence and the econ­omy is not ex­pected to record more than 0.5 per­cent year-onyear growth in 2017.”

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