What you need to know about the widening of South Africa’s Q1 current account deficit

PUBLISHED: Thu, 21 Jun 2018 11:33:06 GMT

PRETORIA (Reuters) – South Africa’s current account deficit widened more than expected in the first quarter to register its largest shortfall in two years as the trade balance swung to a deficit after a steep decline in exports, the central bank said on Thursday.

Investor sentiment in South Africa picked up after President Cyril Ramaphosa pledged to clean up poor governance that critics say beset the administration of his predecessor Jacob Zuma.

But a string of poor data, including the worst quarterly GDP contraction in nine years in the first quarter, has raised concerns over the recovery in the economy.

In response to news of the widening deficit, the rand extended its losses to the dollar, trading at 13.7575 at 0822 GMT from 13.6875.

The South African Reserve Bank said in its quarterly bulletin the current account deficit widened to 4.8 percent of gross domestic product in the first quarter from 2.9 percent in the fourth quarter of last year.

The deficit was the largest since the first quarter of 2016 and wider than the average forecast by economists surveyed by Reuters, who had expected it at 3.8 percent of GDP.

The quarterly trade balance swung to a deficit of 25 billion rand ($2 billion) from a surplus of 74 billion rand as the value of exports fell sharply, the central bank said.

“The value of merchandise exports was affected by both lower export volumes and lower rand prices as the external value of the rand strengthened,” the bank said.

($1 = 13.7177 rand)

Reporting by Olivia Kumwenda-Mtambo; Editing by James Macharia

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