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SA's trade deficit is at 6.5%

Cape Town - South Africa’s current account deficit will be about 6.5% of GDP this year, according to Finance Minister Pravin Gordhan's mini budget tabled in Parliament on Wednesday.

This reflected both the low level of domestic savings and considerably higher imports than exports, he said.

"This means the economy is reliant on foreign savings to fund the gap between government revenue and spending, and the cost of infrastructure expansion."

In recent years, the current account deficit had been comfortably financed by capital inflows, signalling the broad confidence of international investors in South Africa’s economic prospects.

Investor sentiment was volatile, however, and global capital allocation was likely to shift as the United States' monetary authorities tapered their asset purchase programme.

Government’s supportive macro-economic, fiscal and monetary policies provided the economy with flexibility to adjust and weather short-term volatility, he said.

South Africa’s clear articulation of a credible growth strategy, and effective implementation of programmes to broaden participation and reduce inequality, were important foundations of both domestic confidence and continued financial stability.

The country's foreign reserves had risen from $34.1bn at the end of 2008, to $47.9bn at the end of August this year.

"Effective regulatory oversight of the financial system contributes to stability and confidence in South Africa as an investment destination," he said.


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