Current account deficit reaches 2.1% of GDP
SOUTH Africa’s current account deficit widened to 2.1 percent of gross domestic product (GDP) in the first quarter of this year, compared to a deficit of 1.7 percent in the fourth quarter of last year, the South African Reserve Bank (Sarb) said yesterday.
According to Sarb, South Africa’s trade surplus widened marginally from R56 billion in the fourth quarter of last year to R57bn, it said in the Quarterly Bulletin for June.
“The broadly unchanged trade surplus occurred alongside a widening of the shortfall on the services, income and current transfer account, from R132bn in the fourth quarter of 2016 to R149bn in the first quarter of 2017. Consequently, the deficit on the current account of the balance of payments widened from R76bn in the final quarter of 2016 to R92bn in the first quarter of (this year),” the report said.
The bank said the value of merchandise exports declined marginally by 0.2 percent in the first quarter of this year, following an increase of 3.7 percent in the final quarter of last year. Lower values of exported manufactured and agricultural goods countered an increase in the value of mining exports was fully countered.
“The decrease in manufactured goods exported coincided with weak domestic manufacturing activity as reflected by the third successive quarterly contraction in real gross value added by the manufacturing sector in the first quarter of (this year).
“This came about despite a recovery in global demand as evidenced by an improvement in manufacturing purchasing managers’ indices and consumer confidence in many economies in the first quarter of (this year),” the bank said.
Sanisha Packirisamy, an economist at MMI Holdings, said yesterday that the current account deficit should not cause alarm. But she said its funding should be a key concern.
“Foreign direct investment remained negative and South Africa remains reliant on volatile portfolio inflows – foreigners buying SA bonds and equities – which ebb and flow on sentiment.
“Given that political and ratings risks linger in the current climate, we are at risk of seeing capital outflows,” said Packirisamy.
Investec economist, Kamilla Kaplan said yesterday that the current account deficit was expected to narrow to 2.8 percent of GDP in this year, from last year’s 3.3 percent.
Nedbank yesterday said it expected the current account deficit to widen further in the coming quarters “as domestic demand rises, albeit at a moderate pace. “We still expect exports to be propped up by improving global demand, but this will remain highly dependent on domestic production improving, while risks to global growth remain on the downside.”
Nedbank said weak economic growth and an improving inflation outlook suggested that interest rates had peaked.
The Reserve Bank said private sector fixed investment increased at an annualised rate of 1.2 percent in the first quarter of this year, after contracting for five consecutive quarters. It said increased capital outlays on residential buildings and machinery and other other equipment had boosted the private sector investment spending.