Current account gap surprises

Pretoria -  The deficit on South Africa's current account narrowed more than expected to 2.5% of gross domestic product in the second quarter.

This is partly due to a surplus on the trade account and inflows related to the 2010 FIFA World Cup, the South African Reserve Bank (Sarb) said on Wednesday in its latest quarterly bulletin.

The current account deficit narrowed from 4.6% in the first quarter, and was much smaller than the 3.2% expected by analysts in a Reuters poll last week.

Sarb said in its September quarterly bulletin the trade account swung to a surplus of R13.2bn, after a R12.9bn deficit in the first quarter.

Exports rose 6.4% in value terms in the second quarter and were up 1.0% in volume, reflecting increased trading between South Africa and fast-growing economies such as China and India and some countries in the eurozone. Imports were slightly up.

Spending by tourists during the month-long soccer tournament that started in June led to a substantial narrowing of the deficit on the services, income and current transfer account, trimming it to R80.1bn from a gap of R103.2bn in the first quarter.

"Total spending by foreign tourists in the second quarter of 2010 is estimated to have amounted to about R15bn," Sarb said.

"Travel receipts accordingly surged to 51% of total receipts for service, income and current transfers in the second quarter of 2010, compared with an annual average of about 42% during the preceding 10 years," Sarb said.

This deficit is unlikely to be sustained, said adviser to the Sarb governor and bank chief economist Monde Mnyande.

"That deficit can be easily financed [but] I don't think it will remain at those levels in the short term," Mnyande said.