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Johannesburg - South Africa's trade deficit narrowed to R7.77bn in March from R9.52bn in February as exports of mineral products and base metals increased, data showed on Tuesday.
March exports rose by 2.9% from the previous month while imports were down 0.3%, the South African Revenue Service (Sars) said.
This ray of positivity was unfortunately overshadowed by a much wider Budget Deficit at –R15.51bn vs expectations for a deficit of –R4bn, said Mohammed Nalla, head of strategic research at Nedbank Capital.
"This was as revenue grew by a sluggish 2.8% versus expenditure growth at 7.7%.
"This much wider budget deficit echoes the concerns of ratings agencies which have indicated the view that revenue projections are optimistic, and in the context of sluggish global growth, are likely to disappoint," he said.
Nedbank economist Johannes Khosa told I-Net Bridge that the better than expected trade numbers should help to ease some pressure on the current account for the first quarter, which could help the rand at least in the short term.
He noted, however‚ that the figures are volatile and underlying balance of payment trends remain concerning.
"The Reserve Bank is likely to strike a balance between the poor inflation outlook and weak economic growth by keeping rates steady," Khosa said.
Economists surveyed by Reuters last week expected a trade shortfall of R8.5bn.
Although this is a more reassuring number, it does not do much to alter the bigger picture, said Razia Khan, regional head of research for Africa at Standard Chartered.
Khan said that the year-to-date deficit still stands at a massive R41.84bn rand compared with the already negative R25.57bn deficit recorded over the same period last year.
"While the rand might receive some temporary reprieve from this data, the overall trend is still a concern.
"The key question is when South Africa will see more meaningful recovery in key export markets," Khan said.
The rand weakened to R9.0225/$ by 12:21 GMT, partly tracking a softer euro, from R8.9670/€ before the trade data was released at 12:00 GMT.
The yield on the 2026 benchmark bond rose to 6.745% from 6.725% prior to the release, while that for the paper due in 2015 was at 5.21% from 5.195%.
"The ‘twin deficit’ problem SA faces is seen as a key vulnerability to the rand and foreign flows, of which SA has been the grateful beneficiary," Nalla said.
He added that if a credit ratings downgrade materialise later in the year, this could be largely damaging for the rand and domestic asset prices.
March exports rose by 2.9% from the previous month while imports were down 0.3%, the South African Revenue Service (Sars) said.
This ray of positivity was unfortunately overshadowed by a much wider Budget Deficit at –R15.51bn vs expectations for a deficit of –R4bn, said Mohammed Nalla, head of strategic research at Nedbank Capital.
"This was as revenue grew by a sluggish 2.8% versus expenditure growth at 7.7%.
"This much wider budget deficit echoes the concerns of ratings agencies which have indicated the view that revenue projections are optimistic, and in the context of sluggish global growth, are likely to disappoint," he said.
Nedbank economist Johannes Khosa told I-Net Bridge that the better than expected trade numbers should help to ease some pressure on the current account for the first quarter, which could help the rand at least in the short term.
He noted, however‚ that the figures are volatile and underlying balance of payment trends remain concerning.
"The Reserve Bank is likely to strike a balance between the poor inflation outlook and weak economic growth by keeping rates steady," Khosa said.
Economists surveyed by Reuters last week expected a trade shortfall of R8.5bn.
Although this is a more reassuring number, it does not do much to alter the bigger picture, said Razia Khan, regional head of research for Africa at Standard Chartered.
Khan said that the year-to-date deficit still stands at a massive R41.84bn rand compared with the already negative R25.57bn deficit recorded over the same period last year.
"While the rand might receive some temporary reprieve from this data, the overall trend is still a concern.
"The key question is when South Africa will see more meaningful recovery in key export markets," Khan said.
The rand weakened to R9.0225/$ by 12:21 GMT, partly tracking a softer euro, from R8.9670/€ before the trade data was released at 12:00 GMT.
The yield on the 2026 benchmark bond rose to 6.745% from 6.725% prior to the release, while that for the paper due in 2015 was at 5.21% from 5.195%.
"The ‘twin deficit’ problem SA faces is seen as a key vulnerability to the rand and foreign flows, of which SA has been the grateful beneficiary," Nalla said.
He added that if a credit ratings downgrade materialise later in the year, this could be largely damaging for the rand and domestic asset prices.
