by Sainfo

SA's current account deficit narrows

Global trade volumes gain momentum

The reserve bank says SA's current account deficit narrows.

The South African Reserve Bank has announced that the current account deficit narrowed from 6.5% in the fourth quarter of last year to 5.8% of gross domestic product (GDP) in the first quarter of this year.

"With the value of merchandise exports advancing at a slightly firmer pace compared to merchandise imports, the trade deficit narrowed from R86.1 billion in the fourth quarter of last year to R78.2 billion in the first quarter of this year," the central bank said in its June quarterly bulletin.

Consistent with the pick-up in world economic activity, global trade volumes gained further momentum in the first quarter.

The shortfall on services, income and current transfer account with the rest of the world, which had remained broadly unchanged since the second quarter of last year, improved markedly in the first quarter of this year, supporting the improvement in the country's trade balance

"Consequently, the deficit on the current account of the balance of payments narrowed from R212.6 billion in the fourth quarter of 2012 to R190.9 billion in the first quarter of 2013," the Bank said.

"As a ratio of the country's gross domestic product, the deficit came to 5.8% in the first quarter of 2013, noticeably lower than the 6.5% registered in the preceding quarter."

According to the bulletin, the volume of mining and manufactured goods exported increased in the first quarter of this year.

"At the same time, the export earnings of South African producers continued to benefit from the lower exchange value of the rand which extended into the first quarter of 2013. As a result, the value of merchandise exports advanced by 11.9% to R800.1-billion in the first quarter of 2013, up from R715 billion in the fourth quarter of 2012," the Bank said.

Some analysts had expected the deficit to have risen sharply.

Nedbank said the narrower deficit was encouraging, but said the shortfall still remained large and that the rand was still vulnerable.

"The balance of payments will remain under pressure in 2013," the Bank said.

"Trade performance will remain lacklustre as long as the global environment remains unfavourable. More domestic production disruptions, mainly labour strikes, would add to the weak external trade account."

Nedbank added that general economic conditions remained weak.

"Today's numbers confirm that general economic conditions remain weak, with significant downside risks. Risks to the inflation outlook remain high due to further weakness of the rand.

"We expect the Reserve Bank to continue striking a balance between weak growth and rising inflation by maintain its accommodative monetary policy stance well into 2014."

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