South Africa’s current account deficit decreases as imports drops

South Africa’s current account deficit decreased more than expected in the final quarter of 2013.  This was due to the fact  that exports outpaced imports to reduce the shortfall on the trade account in Africa’s biggest economy.  In its latest Quarterly Bulletin, released on Wednesday, the South African Reserve Bank (SARB) said the current account deficit stood at 5.1 percent of gross domestic product, its lowest since the start of 2012, when the shortfall was 3.9 percent.

The figure compared with a revised 6.4 percent shortfall in the third quarter, and a consensus forecast from economists at 5.7 percent.  Furthermore, the rand strengthened slightly after the figures, but then retreated to stand at 10.9065 by 08:31 GMT, around 0.5 percent weaker on the day and its softest level in a week.

The bank said exports of cars and transport equipment picked up in the fourth quarter as manufacturers recovered from a strike in the previous three months.  Portfolio inflows reversed in the fourth quarter. The financial account also saw outflows totaling 30.8 billion rand, compared with 48.8 billion rand of inflows in the third quarter.

However,  according to the bank, other investment flows switched from outflows to inflows in the last three months of the year.  On an annual basis the current account deficit was wider than in 2012.  Import inflation saw South Africa’s terms of trade, the ratio of export prices to import prices, deteriorate in the fourth quarter, the third consecutive quarterly fall.

South Africa’s rand hit a string of five-year lows in January this year, pushing up the local price of imports, and the value of merchandise imports increased 16 per cent in 2013 compared with the previous year.

Source: CNBC Africa