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Pretoria - Pretoria - South Africa’s current account deficit narrowed sharply to 0.6% of gross domestic product (GDP) in the fourth quarter of 2010 from a revised 3.1% in the third quarter, the Reserve Bank said on Tuesday.
In its March quarterly bulletin, the Reserve Bank said the current account was at its smallest since the fourth quarter of 2003.
The trade surplus with the rest of the world increased significantly to R86bn in the fourth quarter compared with a R30.3bn surplus in the third quarter, as imports fell.
Analysts polled by Reuters last week had expected a current account shortfall of 2.55% of GDP.
Growth in spending in the economy slowed to 1.2% in the fourth quarter of 2010 from 6.2% in the previous quarter, the Reserve Bank said.
Kamilla Golda, analyst at ETM, said the current account figures were expected.
“Current account figures came in exactly as we expected and the main driving force was the trade dynamics in Q4, and more specifically the large trade surplus.
“The key thing that this reflects is the still-weak appetite from domestic consumers for consumption and credit, and for as long as credit growth remains subdued we can expect the current account deficit to remain well contained.”
Razia Khan, head of Africa Research at Standard Chartered, said the smaller deficit will boost the rand.
“A staggeringly good current account deficit print that will do much to boost the rand for now,” she said.
“However, looking at the breakdown of factors that contributed to this performance, a key question still revolves around sustainability. Notwithstanding the slight slowing in the growth rate of household consumption expenditure, we still see an overall economic recovery in place in South Africa, and this will necessarily boost import demand in the months to come.”
Renaissance BJM economist Elna Moolman said the figure was “very encouraging”.
“We do expect the current account to deteriorate in 2011 but still remain at reasonably low levels. It is only towards 2012 where we expect the current account to become wide enough to really start impacting on investor perceptions and the rand again,” she said.
In its March quarterly bulletin, the Reserve Bank said the current account was at its smallest since the fourth quarter of 2003.
The trade surplus with the rest of the world increased significantly to R86bn in the fourth quarter compared with a R30.3bn surplus in the third quarter, as imports fell.
Analysts polled by Reuters last week had expected a current account shortfall of 2.55% of GDP.
Growth in spending in the economy slowed to 1.2% in the fourth quarter of 2010 from 6.2% in the previous quarter, the Reserve Bank said.
Kamilla Golda, analyst at ETM, said the current account figures were expected.
“Current account figures came in exactly as we expected and the main driving force was the trade dynamics in Q4, and more specifically the large trade surplus.
“The key thing that this reflects is the still-weak appetite from domestic consumers for consumption and credit, and for as long as credit growth remains subdued we can expect the current account deficit to remain well contained.”
Razia Khan, head of Africa Research at Standard Chartered, said the smaller deficit will boost the rand.
“A staggeringly good current account deficit print that will do much to boost the rand for now,” she said.
“However, looking at the breakdown of factors that contributed to this performance, a key question still revolves around sustainability. Notwithstanding the slight slowing in the growth rate of household consumption expenditure, we still see an overall economic recovery in place in South Africa, and this will necessarily boost import demand in the months to come.”
Renaissance BJM economist Elna Moolman said the figure was “very encouraging”.
“We do expect the current account to deteriorate in 2011 but still remain at reasonably low levels. It is only towards 2012 where we expect the current account to become wide enough to really start impacting on investor perceptions and the rand again,” she said.
