Fin24

Current account gap widens further

2012-09-11 10:41

Johannesburg - South Africa's current account recorded its largest shortfall in over three years in the second quarter of 2012 as exports fell because of subdued external demand, while increased government spending on wages pushed gross domestic expenditure up.

The Reserve Bank said on Tuesday higher dividend payments to the rest of the world resulting in a shortfall on the service, income and current transfer account also added to the current account gap.

"Despite a depreciation in the exchange value of the rand, export volumes declined notably, influenced by the general moderation in global demand," the central bank said in its latest quarterly bulletin.

"With South Africa's terms of trade also registering a modest further deterioration, the deficit on the current account widened to 6.4% of GDP."

The prices of imported goods grew faster than export prices, with the value of exports contracting.

However, gross spending accelerated in the quarter, led by government spending on wages after public sector trade unions negotiated a 7% salary increase in July.

The bank said that even though net dividend payments to non-residents were expected to remain high, the forecast increases would not be hugely significant.

South Africa's second quarter growth rebounded to 3.2% due to a big recovery in the mining sector. However the bank said that growth rate may not be sustainable.

"The non-primary sector of the economy has slowed down and the boost we got from mining may come to haunt us in the next quarter," said Rashad Cassim, head of research the central bank.


*Follow Fin24 on Twitter, Facebook, Google+ and Pinterest.