Current account deficit widens to 2.4%

Pretoria – The current account deficit has widened from 2% to 2.4% of GDP for the second quarter of the year, the South African Reserve Bank (SARB) said on Thursday.

According to the SARB’s quarterly bulletin of September 2017, the improved trade surplus was outweighed by the widening shortfall of the service, income and current transfer account.

The deficit on the current account of the balance of payments widened from R91bn to R110bn.

The trade surplus improved for the third consecutive quarter, having widened from R57.4bn in the first quarter to R64.6bn in the second quarter. This was helped by the increase in the value of exported gold and merchandise goods, which was faster than the increase in value of imported merchandise, the report indicated.

The value of merchandise exports improved by 3.1% from a 0.2% drop in the first quarter, while both the mining and manufacturing exports increased.

The deficit of the services, income and current transfer account increased from 3.3% of GDP in the first quarter to 3.8% in the second quarter of the year. This report noted that this is similar to what was seen in the first quarter of 2016..

The largest contributor to the deficit was net current transfer payments, which increased significantly in the second quarter. This was due to the increase in the amount paid to South Africa’s trading-partner countries in the Southern African Customs Union (SACU) at the start of the 2017/18 fiscal year, the report explained. Treasury had budgeted to pay R56bn for the fiscal year, and in the second quarter paid R14bn.

The net income deficit had widened as dividend payments to non-resident investors declined further in the second quarter of 2017, resulting in a contraction of almost 25% in the first half of 2017 compared to the same period in 2016. This shows the impact of the weak economic environment on the distribution of profits, according to the report.

But dividend receipts from abroad declined even more than dividend payments to non-residents. The ratio of dividend payments to dividend receipts rose from 2% in the first quarter to 2.7% in the second quarter.

Net payments of services also increased in the period, particularly for “other services”. Travel receipts, which make up 55% of total service receipts, remained unchanged. Receipts for passenger-related services provided to non-residents decreased in the second quarter of 2017.

In 2016 the current account deficit for the year was 3.3% of GDP.

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