By Iliya Kure
South Africa’s current account deficit widened to 4.8% in the first quarter of 2018, the Reserve Bank said on Thursday.
“The shortfall on the services, income and current transfer account narrowed in the first quarter of 2018 but by much less than the deterioration in the trade balance. As a result, the deficit on the current account of the balance of payments widened significantly from R137 billion in the fourth quarter of 2017 to R229 billion in the first quarter of 2018,” said the central bank in its June Quarterly Bulletin.
As a ratio of Gross Domestic Product (GDP), the current account deficit widened from 2.9% in the previous quarter to 4.8% in the first quarter of 2018.
The Quarterly Bulletin stated that South Africa’s trade balance switched from a surplus of R74 billion in the fourth quarter of 2017 to a deficit of R25 billion in the first quarter of 2018, as the value of net gold and merchandise exports decreased more than that of merchandise imports.
The value of merchandise exports was affected by both lower export volumes and lower rand prices as the external value of the rand strengthened.
At the same time, the value of merchandise imports decreased due to lower volumes.
In a research note earlier, Standard Bank analyst Shireen Darmalingam said the bank expected the deficit to widen to 3.8% of GDP.
The bank attributed the deterioration to the country’s weaker terms of trade and a deterioration in real trade trends (volumes).
“[This] is due largely to lower export prices but we expect that it does not yet fully reflect the spike in oil prices. The latter was boosted partly by temporary spikes in machinery and oil import volumes,” said Darmalingam.
The bank forecasts the current account deficit to widen to an average 3.3% of GDP in 2018 (and 3.4% of GDP in 2019), from a previous deficit of 2.5% in 2017.
At its Monetary Policy Committee meeting in May, the Reserve Bank forecasted the current account deficit to average 3.3% of GDP in 2018 and 3.6% of GDP in 2019.
https://www.africaprimenews.com/2018/04/19/business/south-african-reserve-bank-thursday-says-it-has-noted-developments-involving-auditing-firm-kpmg/
