EDITORIAL: Economy still in a sticky spot
Reliance on volatile portfolio flows makes SA extremely vulnerable to shifts in international sentiment regarding emerging markets or to SA’s own issues
The size of the subsidies SA pays its South African Customs Union (Sacu) neighbours is sure to come up for discussion after the release of the latest Reserve Bank quarterly bulletin on Thursday. Transfers to Sacu were the main reason behind the surprise jump in the deficit on the current account of the balance of payments in the second quarter. With the trade balance improving, the market had expected that the deficit would narrow to 1.9% of GDP, from 2% in the first quarter. Instead, it increased to 2.4%. Without the Sacu transfers — which were the equivalent of 0.4% of GDP, according to the Reserve Bank’s economists — the deficit would have been unchanged. The second quarter was the first quarter of the new fiscal year, and February’s budget projected an increase in the Sacu transfers from R40bn to R56bn, hence the hit to the income part of the current account.
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