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Trade deficit widens to R12.2bn

Sep 28 2012 14:54

Johannesburg - South Africa's trade deficit widened to R12.2bn in August after a R6.7bn shortfall in July, the South African Revenue Service said on Friday.

Exports decreased by 3.3% month-on-month to R61.4bn in August while imports rose by 4.9% to R73.6bn rand, Sars data showed.

Economists surveyed by Reuters expected a shortfall of R6bn for August but the data is volatile and hard to forecast.

The cumulative deficit for the year to date amounted to R69.9bn compared to R8.7bn for the same period in 2011, Sars said.

Said analyst George Glynos: “It’s a terrible number, absolutely shocking and seriously raises questions about the wisdom of having reduced interest rates at the (July) MPC meeting. It certainly doesn’t argue for another rate cut, that’s for sure.

“Clearly the country is consuming a lot more than it’s producing and this obviously renders the currency environment vulnerable. The rand far more vulnerable to a blow off and it’s a disappointing number.

“It doesn’t bode well for price stability and raises the requirement of South Africa to continue attracting huge portfolio inflows or we have significant rand volatility,” Glynos said.

“It is much wider than anticipated. We have been concerned for a long time about the trade and current account balances and this is continuing a streak of very wide trade deficits which is a risk to the rand in the longer-term. And also at the margin reduces the scope for the Reserve Bank to cut rates again,” said Renaissance Capital economist Elna Moolman.

“The trade balance is another negative surprise, with the deficit almost double what the market had been expecting.

“The trade data for August will not have captured the full impact of the industrial unrest in mining. As such, the market will be braced for even worse trade data still to come. Together with the slowdown that we see underway in South Africa’s key trading partners, this is not good news for the current account deficit. Rand negative," said Razia Khan, head of research Africa, Standard Chartered.

Market reaction

The rand fell to R8.3065 against the dollar by 12:29 GMT from R8.2725 before the data was released at 12:00 GMT.

The yield on the 2015 bond rose to 5.39% from 5.365% while that for the 2026 issue was up at 7.445% from 7.415%.

The trade account recorded its first annual surplus in seven years in 2010 but swung back into deficit last year as  rising imports outweighed export receipts.   

This weighed on the current account, which widened to 3.3% of GDP in 2011 from 2.8% in 2010.

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sars  |  sa economy  |  trade deficit


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