First-quarter current account deficit widens more than expected
SA’s current account deficit widened more than expected in the first quarter of 2018 to 4.8% of GDP from 2.9% in the previous quarter and 2% the year before.
According to the Reserve Bank’s Quarterly Bulletin released on Thursday in Pretoria, SA recorded a trade deficit after five consecutive quarters of surpluses. The trade balance switched from a surplus of R74bn in the fourth quarter of 2017 to a deficit of R25bn in the first quarter of 2018 due to decrease in net gold and merchandise exports.
Merchandise imports were hurt by lower export volumes and lower rand prices as the rand strengthened.
The shortfall on the services, income and current transfer account narrowed in the first quarter to 4.3% of GDP from 4.4% of GDP in the fourth quarter of 2017.
SA’s current account deficit widened to R229bn in the first quarter of 2018 from R137bn in the fourth quarter of 2017. The Reserve Bank said this was due to the country’s trade surplus shrinking while its shortfall on the services, income and current transfer account grew.
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.
The Bloomberg Consensus was for a deficit of 3.9%, while First National Bank (FNB) expected a deficit of 3.1%.
However, FNB chief economist Mamello Matikinca said last week: "There is a material risk that the number could be worse than our forecast as the invisible services component could show higher than anticipated capital outflows. Should the data disappoint relative to what the market is pricing, we expect further rand weakening to persist through to the end of the week."