Better than expected current-account deficit surprises analysts
By Sunita Menon - Mar 13th, 09:04
SA’s current-account deficit narrowed more than expected on a wider trade surplus in the fourth quarter.
The deficit improved to 2.2% of GDP in the fourth quarter from 3.7% in the previous quarter, mainly due to the smaller trade surplus, data from the SA Reserve Bank showed.
The third-quarter current-account deficit was revised up from 3.5% to 3.7%.
Investec expected the deficit to narrow to 3.2%, while Absa expected a deficit of 3.7% and NKC projected a narrowing to 3.3%.
For the year, the ratio deteriorated from 2.5% in 2017 to 3.5% in 2018.
The current account is indicative of SA’s trade with the rest of the world. Compared to recent years, the deficit has narrowed significantly after averaging more than 5% of GDP between 2012 and 2015.
SA relies on reliant on portfolio inflows to finance the current account and budget deficits that which have widened in recent years on lower tax revenues and fixed investments from weak economic growth and policy uncertainty.
The deficit on the current account of the balance of payments narrowed by R70.2bn to R110.2bn in the fourth quarter compared to R180.4bn in the third quarter.
Meanwhile, SA’s trade surplus widened substantially from R10.2bn in the third quarter to R71.8bn in the fourth quarter as exports increased and imports declined.
For the year, the trade surplus deteriorated by R40.6bn, from R64.9bn to R24.3bn.
"The moderating global economy could impact negatively on SA’s exports, while the deficit on the services account is considered structural in nature,” NKC economist Elize Kruger said.
While there could be a moderate improvement as business confidence will boost private-sector investment after the general election in May, Capital Economics economist John Ashbourne warned that a sustained reduction of the current account would require a change in the structure of the economy.
“This is unlikely to change over the short term,” he said.
“Portfolio investment is short term in nature and often volatile [as it is] subject to global risk sentiment and financial conditions as well as the country’s sovereign credit ratings,” Investec economist Kamilla Kaplan said.
“Increased levels of foreign direct investment are required to strengthen the composition of the financing of the current account such that there is less reliance on portfolio inflows,”Business Live
Nike and Adidas join 173 US shoe retailers in call to avoid ‘catastrophic’ tariffs
21/05/2019 - 12:23
Nike, Adidas, and other footwear giants urged President Donald Trump to reconsider his tariffs on shoes made in China, saying the policy would be “catastrophic for our consumers, our companies and the American economy as a whole”.
Contraction in economy looms in the first quarter
17/05/2019 - 09:16
Weak performances in the retail, mining and manufacturing sectors, which bore the brunt of the most severe power cuts the country has experienced yet, indicates that the economy contracted in the first quarter of the year.
Retail sector barely budged in March
16/05/2019 - 09:54
Consumers were under pressure in March with a 74c/l hike in the petrol price and slightly higher inflation.
Load-shedding knocks mining and manufacturing in the first quarter
13/05/2019 - 09:36
Despite a better performance in March, both sectors recorded contractions in the first quarter of the year - with production severely constrained by load-shedding.
SA retailers seek post-election boost as belts tighten
10/05/2019 - 11:02
Londani Nemaguvhuni’s Sunday trip to the Mall of Africa north of Johannesburg is a finely balanced operation. The 29-year-old has to provide for his young son but also needs to cut costs.