South Africa’s fourth-quarter 2003 current account deficit, which at R5,857-billion was the largest since the record quarterly deficit of R7,048-billion in the third quarter of 1998, may in fact be close to zero, as the deficit is less than a third of the R17,299-billion of the net inflow of foreign unrecorded foreign transactions, which can be of a capital or current nature.
In the third quarter of 2003, the first estimate was that unrecorded foreign transactions were R14,231-billion. This has now been revised to R10,499-billion.
Of the R3,732-billion now allocated to either the current or capital account, fully 32,1% went to the current account.
If this factor is applied to the unrecorded foreign transactions in the fourth quarter of 2003, then the “near-record” current account deficit shrinks to only R304-million or from 1,8% of gross domestic product (GDP) to only 0,1% — near enough to nothing to make no difference.
This reduction in the current account deficit is by no means unique to the 2003 data, as there were substantial revisions to the current account balances for the years 2000 to 2002 in the latest South African Reserve Bank (SARB) Quarterly Bulletin.
The 2001 current account balance has now been revised to show a surplus of R320-million compared with a previous estimate of a R2,816-billion deficit.
The revision was due to the raising of exports by about R3-billion annually since 2000. The 2000 current account deficit is now R1,755-billion compared with a previous estimate of R3,653-billion, while the 2002 current account surplus has been revised higher to R6,66-billion from R3,28-billion.
In percentage of GDP terms, the current account surplus rose in 2002 from 0,3% to 0,6% and this 0,3% difference should be added to the current estimate of GDP growth of 3,6%.
Given the uncertainty caused by the “statistical noise” of unrecorded foreign transactions equivalent to 5,6% of GDP, economists and credit analysts should focus on the overall balance of payments (BOP).
South Africa’s BOP surplus was a record R28,736-billion in the fourth quarter 2003 after a R7,273-billion surplus in the third quarter of 2003 and the previous record of a R22,654-billion surplus in the second quarter of 2003.
The fourth-quarter 2003 surplus was equivalent to 9,3% of GDP from only 2,4% in the third quarter of 2003.
This brought the cumulative BOP surplus for 2003 to R53,329-billion or 4,4% of GDP and is one of the reasons why the rand has been so strong.
South Africa had a BOP surplus of R37,112-billion in 2002, the fourth consecutive annual surplus after a R7,709-billion surplus in 2001, R5,559-billion surplus in 2000 and R26,199-billion surplus in 1999.
The large amount of unrecorded transactions was despite the introduction of a new reporting form in April 2001 after the SARB had a then-record foreign unrecorded transactions of R14,275-billion in the fourth quarter of 2000.
The SARB said net other investment, which excludes foreign direct investment and net portfolio investment, into South Africa surged to R22,417-billion in the fourth quarter of 2003 from only R4,125-billion in the third quarter of 2003.
Total recorded capital inflows amounted to R44,174-billion in 2003 compared with R24,92-billion in 2002, while unrecorded inflows amounted to R19,261-billion in 2003 from R5,694-billion in 2002. — I-Net Bridge