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Figures released by the South African Revenue Services (SARS) on Wednesday showed that the country recorded a much larger than expected deficit in October of R9.6 billion, due to a sharp jump in imports and a large decline in exports.

October's deficit, which follows a R2.5 billion surplus in September, is the largest trade shortfall since January 2009 when a record R17.4 billion deficit was recorded.

This means that the cumulative deficit for the year to date is R15.3 billion compared to R13.4 billion in 2010, an increase of R1.9 billion (14%).

According to Lings, SA's import demand is likely to rise as the economic recovery continues.

"However, because the recovery is not especially focused on fixed investment spending, the increase in imports should be reasonably well contained. Unfortunately, given the sluggish nature of the world economy (including the recent fall-off in global commodity prices), South Africa is going to struggle to maintain is recent export performance, despite the somewhat weaker Rand," he says.

He adds that the combination of increased imports and sluggish export growth implies that SA's trade balance is likely to record a deficit on a more regular basis.

"Crucially, while the increase in the trade deficit will dampen GDP growth estimates, we don't expect that the deficit will reach the levels recorded in 2007, on a sustained basis. This implies that the deficit on the current account should experience some increased pressure over the coming 12 months; but the deterioration should remain manageable (less than 5% of GDP) and relatively easily finance through the capital account," Lings maintains.

He stresses that SA trade data remains extremely volatile month-by-month and hard to interpret without looking at the overall trend.

"On a trend basis, the trade balance moved from a persistent and large deficit in 2006 to 2009 to a more regular trade surplus in 2009/2010 (especially during the recession phase and the early part of the economic recovery). However, in recent months, the trade balance has reverted back to more regular deficits. In general, as economic activity picks-up, imports tend to rise. This is especially the case if there is a more rigorous increase in fixed investment activity (resulting in a strong rise in machinery and equipment imports)," Lings points out.

Nedbank's economic unit concurs that the trade balance will remain volatile in the months ahead, with growth in exports - which might benefit from the weakening rand - likely to be contained by weaker global growth, while imports are likely to benefit from relatively firm domestic demand.

"The trade figures are notoriously volatile and are unlikely to influence monetary policy in the short term. The MPC's focus will remain on inflation and growth. We expect the MPC to keep interest rates on hold until the second half of 2012, but if recession threatens, they may opt to cut rates over the short term or keep rates unchanged for even longer," the Nedbank economists say.

Adding her voice to the chorus of economists who believe that exports are likely to remain constrained, Standard Bank's Nomvuyo Guma says: "The sober outlook for the global economy - in particular the likelihood that Europe will, in our view, slide into recession shortly, does not inspire confidence in South Africa's export prospects. Net exports have consistently subtracted from GDP growth over the last two years - and it is increasingly likely that the same will be said for 2011."

She adds: "This outcome does not alter our view on interest rates. Though compelling evidence of a marked slowdown in economic growth has become evident, the Reserve Bank is unlikely to move on interest rates in the face of significant prices pressures. We remain of the view that rates will remain on hold throughout 2012.

On the implications for the rand, she says: "The sharp widening in the trade deficit is detrimental to the rand's fundamentals, given the adverse impact on GDP and the current account. The latest data is thus likely to inspire further weakness."