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Current account deficit narrows to 3.3%

Sep 06 2018 20:05
Sibongile Khumalo

South Africa's current account deficit improved to 3.3% in the second quarter of 2018, a report by the SA Reserve Bank revealed. 

The Reserve Bank on Thursday released a report on its Balance of Payments for the second quarter of the year. 

It showed that the current account deficit had narrowed by R55.6bn to R163.8bn compared to the first quarter, marking two consecutive quarters of a deficit.

"As a ratio of gross domestic product, the current account deficit improved to 3.3% in the second quarter of 2018, from 4.6% in the first quarter," the report read.

According to research by Nedbank, the current account deficit is likely to widen marginally in the second half of 2018. 

The bank believes that the deficit for the rest of the year is likely to be just above 3% of GDP, due to increased risks to the inflation outlook following the July Monetary Policy Committee (MPC) meeting.

These risks are mainly caused by depreciation of the rand, and higher international oil prices.

As a result, Nedbank predicted that the MPC was likely to keep interest rates unchanged until the second half of 2019.

The report also showed that SA's trade balance bounced back from a deficit of R15.2bn in the previous quarter to a a surplus of R41.9bn. This was on the back of strong exports, the Reserve Bank said.

"The improvement in the trade balance came about as the value of net gold and merchandise exports increased more than that of merchandise imports," the bank said in a statement.

The trade figures follow this week’s economic indicators, which showed that the economy slumped into recession, as the GDP contracted by 0.7% in the second quarter of the year.

The recession is likely to pile more woes onto President Cyril Ramaphosa’s bid to attract investment and reduce the stubbornly high unemployment rate, which currently stands at 26.7%.

Following his appointment in February, Ramaphosa announced a plan to raise over R1.2trn in new investments over the next five years. However, some critics have described the plan as too ambitious, in the face of corruption scandals and policy uncertainty.

China is one of the countries that have so far made investment commitments to South Africa.

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