While the trade deficit narrowed slightly to –R37.5bn (Q4: -R41bn) and the services deficit reduced to –R1.5bn (Q4: -R3.8bn), this was expected given the advance release of trade and services data by the SARB when StatsSA released GDP, Schoeman said.
StatsSA last week reported South Africa recorded a negative growth rate of -1.2% in the first quarter of 2016, a far cry from the National Development Plan’s mooted 5%.
Schoeman said on Tuesday the negative surprise to Citi's forecast was a wider income deficit of –R136bn (Q4: -R112bn) and transfers deficit of –R36bn (Q4: -R33bn).
"The income deficit is now the largest on record, with direct investment receipts continuing to shrink and a big pick-up in dividend payments abroad. The latter is from non-direct investment which includes portfolio and other investment."
The improvement in the trade deficit was mostly due to export value (1.1%) outpacing import value (0.8%).
"Growth in both was due to a pick-up in prices: export price growth (2.9%) offset a 2.2% contraction in volumes, while import prices grew 2.4% while volumes slowed to 1.6%. A smaller services deficit was mostly due to a 9.0% increase in travel receipts in line with better tourism numbers and a weaker ZAR now that visa regulations have eased."
On a non-seasonally adjusted non-annualised basis, Q1’s current account totaled R60.9bn.
"While we are encouraged that net portfolio investment picked up to R21.5bn (Q4: -R11bn) it is still concerning that the bulk of financing comes from other investment (R17.7bn) and unrecorded transactions (R33.3bn). The latter two accounts are generally unknown with the SARB ascribing a large bulk of other investment to trade credits," said Schoeman.
Schoeman expressed concern over the drop in gross savings to GDP from 15.4% in Q4 to 15% in spite of higher interest rates. She said households and government remain dis-savers. The only real saver in the economy has been corporates, "but even this segment slipped in Q1".
Gross investment remained 20.0% of GDP.
Schoeman said Citi continues to expect the current account deficit to narrow, but not for encouraging reasons: import compression (particularly consumer imports, as has been seen in Q1) and reduced dividend payments as gross operating surplus remains weak.
"Today’s worse-than-expected figures understandably worsen our view on the 2016 current account deficit to GDP ratio, which we have adjusted from 3.2% of GDP to 3.9% of GDP."