Current-account deficit for first quarter a little better than expected
SA's deficit widened less than forecast as terms of trade improved due to a weaker rand, even though the value of exports fell
SA's current-account deficit widened to 2.9% in the first quarter of 2019, better than the 3.3% deficit expected, partially due to a weaker rand. The weaker currency boosted the value of gold exports, data from the SA Reserve Bank showed on Thursday.
SA's deficit on the current account of the balance of payments widened by R32.3bn to R142.5bn in the first three months of the year compared to R110.2bn in the fourth quarter of 2018, the Bank said.
SA’s terms of trade — which includes gold — improved notably in the first quarter of 2019 as the rand price of imports decreased while that of exports rose slightly.
SA’s trade surplus narrowed from R71.8bn in the fourth quarter of 2018 to R43bn in the first quarter of 2019, with the deterioration coming as the value of merchandise exports decreased more than that of imports.
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The lower value of merchandise exports reflected a decrease in volume, while lower volumes and prices weighed down the value of imported goods, the Bank said.
The shortfall on the services, income and current transfer account widened somewhat to R185.5bn from R182bn.
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.
The Bloomberg consensus had been for a deficit of R149bn, or 3.3%, and also follows a surprisingly upbeat fourth quarter of 2018. Then, 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.
SA relies on portfolio inflows to finance the current-account and budget deficits, which have widened in recent years due to lower tax revenues and fixed investments. Weak economic growth and policy uncertainty has put pressure on the state's coffers, and more bad news was received earlier this week, when it emerged that SA's economy contracted 3.2% in the first quarter.
Looking ahead, import growth is likely to remain constrained by weak domestic economic activity, particularly the weak rates of fixed investment, and by extension poor demand for capital-goods imports, Investec economist Kamilla Kaplan said.
“Additionally, international oil prices have retreated. SA’s export performance is at risk of flagging in view of weaker-than-expected global growth and heightened US-China trade tensions that are weighing on commodity prices, particularly metals prices,” Kaplan said.