Current account deficit narrows to 3.1%

South Africa’s current account deficit narrowed to 3.1% of gross domestic product (GDP) in the second quarter of this year.

“The deficit on the current account of the balance of payments narrowed significantly to 3.1% of GDP in the second quarter of 2016,” said the South African Reserve Bank (SARB).

The bank released its September Quarterly Bulletin on Tuesday.

The 3.1% current account deficit comes after a revised deficit of 5.3% in the first quarter of 2016. Market expectation was for the current account deficit to fall to 3.6%.

“This smaller shortfall on the current account was financed through net portfolio and direct investment inflows, while other investment registered a net outflow,” said the central bank.

According to the bulletin, the country’s trade account switched to a R33 billion surplus on a seasonally adjusted basis from a R48 billion deficit in the first quarter.

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Nedbank economists have welcomed the current account deficit.

“The better-than-expected current account deficit is encouraging, indicating that the current account deficit for the year as a whole will narrow as the weaker rand dampens imports, especially for consumer goods.

“On the export side, the weaker rand should boost volumes but the upside will probably be contained by soft global demand, the commodity price slump, rising domestic production costs and infrastructural constraints,” said Nedbank economists.

True Technologies Aug

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