Disappointing news on current account deficit
SA’s current account deficit narrowed less than expected in the third quarter of 2017, to 2.3% of gross domestic product (GDP) from 2.4% the previous quarter.
According to the Reserve Bank’s Quarterly Bulletin, released on Thursday in Pretoria, SA had a trade surplus for a fourth consecutive quarter.
The surplus widened from R64bn in the second quarter to R71bn in the third quarter, based on a faster decrease of merchandise imports compared with net gold and merchandise exports. Declines in the value of both imported and exported goods were driven by lower volumes.
The current account is indicative of SA’s trade with the rest of the world. Compared with recent years, the deficit has narrowed significantly. The current account deficit averaged more than 5% of GDP between 2012 and 2015.
Despite the improvement in the trade balance, the shortfall on the services, income and current transfer account continued to widen, from R110bn in the second quarter to R180bn in the third quarter.
In 2012-16, SA had one of the largest current account deficits in emerging markets, with the shortfall often exceeding 6% of GDP. The deficit narrowed in 2016 due to an improved trade balance.
The terms of trade remained relatively unchanged in the third quarter as the increase in export prices was offset by the increase in import prices.
Compared with the same period last year, the deficit has narrowed significantly from 3.8% of GDP.
BNP Paribas had expected the deficit to narrow to 1.8% of GDP while Investec had expected it to narrow to 2% of GDP. The Bloomberg consensus was also 2%.