Pretoria - South Africa's current account deficit widened to 3% of gross domestic product (GDP) in the third quarter of the year from 2.5% in the second as a fall in income and services receipts offset capital inflows, the Reserve Bank said on Thursday.
In its December quarterly bulletin, the Reserve Bank said South Africa's trade surplus with the rest of the world had increased significantly in the third quarter of 2010, as terms of trade improved and volumes of exports and imports increased.
But this was neutralised by a widening in the deficit on the income, services and current transfer account, partly because of lower receipts from foreign tourists after the end of the 2010 Fifa World Cup hosted by South Africa in June to July.
"The net result of these two offsetting trends was a slightly wider deficit on the current account of the balance of payments in the third quarter," the Reserve Bank said.
A current account deficit occurs when a country's imports of goods, services and transfers is greater than its exports of goods, services and transfers.
If it is run to increase productivity and exports in the future, a deficit is not viewed negatively and South Africa is generally placed within this ambit.
Analysts polled by Reuters on Monday forecast a Q3 current account deficit of 3.2% of GDP.
The gap was, however, covered by portfolio inflows, most notably into the bond market, as capital flowed into South Africa and other emerging market economies.
The bulletin showed that firm increases in manufacturing output in China and India supported new orders for locally produced mining products.
The volume of manufactured exports advanced by 3.4%, buoyed mainly by increases in the chemical products as well as machinery and electrical equipment categories.
In response to the data Freddie Mitchell, economist at Efficient Group said, "We can see a bit of duration in the figure of -3.0%. The size of imports has increased in the third quarter and this has played a part in the wider deficit."
Carmen Altenkirch, Economist at Nedbank: "The current account deficit widened slightly, mainly reflecting a deterioration on the services account, following the boost provided by the World Cup in the second quarter. Export growth remained robust, supported by strong demand for Asia, particularly for commodities, while improving domestic demand and a strong rand supported strong growth in imports.
"Export growth should moderate next year. Much will depend on how developed economies fare, particularly those in Europe, which absorb 35% of South Africa's exports. Developments in the major developing economies like China and India will also be crucial, especially for mineral exports, which account for just over 20% of total exports.
"Import growth will be helped by stronger domestic demand on the back of lower interest rates, subdued inflation and improving incomes. The strong rand, if sustained, is likely to boost demand for imports.
"Some widening of the current account deficit is therefore expected."