Johannesburg - South Africa posted its smallest current account deficit in four years in the second quarter as a weaker rand boosted exports and curbed consumers’ appetite for imports.
The gap on the current account, the broadest measure of trade in goods and services, eased to 3.1% of gross domestic product from a revised 4.7% in the previous three months, the Reserve Bank said in its Quarterly Bulletin released on Tuesday. The median estimate of 18 economists in a Bloomberg survey was for a shortfall of 3.7%.
The rand’s 14% slump against the dollar this year helped to offset a slide in gold, platinum and other commodity prices, boosting export income and contributing to the nation’s first trade surplus in more than three years. The improvement in the current account deficit may help to underpin the rand as it faces pressure from declining investor sentiment toward emerging markets and rising US interest rates.
“We’ve had some good trade numbers recently and lower imports should help to bring the deficit down,” Isaac Matshego, an economist at Nedbank, said by phone before the data was released.
The trade surplus amounted to R14bn in the second quarter. Exports, excluding gold, surged 6.9% to an annualised R1 trillion in the three months through June, while imports fell 0.8% to R1.06trn, according to the report.
South Africa, which relies mainly on foreign investment in stocks and bonds to help fund its current account deficit, posted an inflow of R54.8bn in portfolio investment in the second quarter. That was up from R39.3bn in the previous three months. Foreign direct investment recorded an inflow of R6.1bn compared with an outflow of R22.2bn in the three months through March.
Foreign receipts were partly undermined by a drop in tourism in the first half of the year, mainly due to the imposition of more stringent visa regulations and a spate of attacks against immigrants, the Reserve Bank said. The services account on the balance of payments, of which tourist income makes up the bulk, dropped by 4.2% in the second quarter.
The narrowing in the current account deficit also reflected the slowdown in Africa’s second-largest economy. Expenditure by consumers, the government and businesses contracted an annualised 7.2% in the second quarter, according to the central bank.
Growth in household spending slowed to 1.2% from 2.4% in the first quarter, while investment spending rose 1% from 1.8%.