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SA deficit narrows in Q4

Mar 19 2012 10:26
Pretoria - South Africa’s current account deficit narrowed to 3.6% of gross domestic product (GDP) in the fourth quarter of 2011 from a revised 4.1% in the third quarter, helped by lower dividend payments to non-residents.

However, in its March Quarterly Bulletin, released on Monday, the Reserve Bank said the current account shortfall for the whole of 2011 widened to 3.3% of GDP from 2.8 % in 2010, largely due to a sharp deterioration during the second quarter.

Analysts polled by Reuters had predicted a 4.1% gap in the current account for the fourth quarter.

The deficit on the income and current transfer payments account was at R93.1bn in the fourth quarter, narrowing substantially from R137.8bn in Q3.

The trade balance switched from surpluses at the start of the year to a deficit in the final quarter as rising domestic demand pushed imports higher.

However, the deficit on the current account was adequately funded by portfolio flows, the Reserve Bank said.

Lower than expected

Dennis Dykes, chief economist at Nedbank said the lower than expected deficit is a "positive signal".

“The outlook remains one of a widening current account balance rather than a contracting one, simply because domestic demand has been increasing at a faster rate than total output.

"That does tend to suggest that we will see a widening in the current account deficit going forward, which will be alright if it’s because of investment rather than consumption reasons but the jury is still out,” he said.

Christie Viljoen of NKC independent economists said the figure was good.

"A narrowing current account is always good and higher spending growth is also obviously good. The fact that it’s the government is not surprising as it just keeps spending more and more, but it’s good to see that households are also doing the same.

“For economic growth it means we did not end 2011 as bad(ly) as expected. And when you look at interest rates, the healthier the economy is, the closer we will get to higher interest rates."
sarb  |  sa economy  |  deficit  |  gdp  |  state spending


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