Cur­rent ac­count deficit reaches 2.1% of GDP

The Star Early Edition - - BUSINESS REPORT - Siseko Njobeni

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.

Weak ac­tiv­ity

“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.

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