UNCERTAIN FUTURE
GAVIN KEETON: Prudence is key to ensuring SA stays afloat
The rand’s recent strong run received a further boost last week with news that our current account deficit with the rest of the world fell sharply in the final quarter of 2016. The current account compares earnings from exports and foreign income inflows with spending on imports and services from overseas. Lower deficits reduce our need for foreign capital inflows. This is welcome news at a time when the magnitude of future inflows is uncertain. For the whole of 2016, the current account deficit was 3.3% of GDP. In the fourth quarter, it fell to 1.7%. But quarterly current account balances are notoriously volatile. The fourth-quarter deficit fell because commodity exports, such as coal and iron ore, benefited from higher prices. Dividend inflows from abroad also rose sharply. At the same time, spending on imports fell, mainly because the economy contracted and businesses ran down their inventories of imported and locally produced goods. It is unclear if similar gains will be repeate...
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