South Africa recorded its first trade account deficit in 22 years during the second quarter of this year, according to the South African Reserve Bank’s quarterly bulletin released on Wednesday.
It also recorded a current account deficit of nearly 4% of gross domestic product (GDP).
The report says a trade surplus of R21-billion in the first quarter of the year was turned into a deficit of R5,5-billion in the second quarter, with imports rising more strongly than exports.
”The volume of exported goods responded positively to the apparent upswing in global economic activity, even though the further increase in the nominal exchange rate of the rand weighed down on the growth in export volumes.”
The trade shortfall contributed to a widening of the current account deficit from minus R14,4-billion to minus R49,3-billion from the first to second quarters.
”Expressed as a ratio of the country’s GDP, the deficit on the current account increased from 1,1% in the first quarter of 2004 to 3,8% in the second quarter,” the bulletin states.
The current account reflects imports and exports as well as trade in services, income and current transfers.
The bulletin says the value of merchandise exports rose by 9,5% in the quarter, but rand prices of exported goods fell by 3% due to the effects of a strong rand.
The impact of lower rand prices of exported goods was countered by a 12,5% rise in the quantity of goods exported.
The value of net gold exports continued to decline, despite an increase of almost 2,5% in the quantity exported, the report states.
Merchandise imports increased by 20,5%, partly attributed to a sharp rise in the volume of crude oil imports, the acquisition of a third corvette by the South African Navy, and purchases of aircraft.
”Leaving these large-item imports aside, the deficit on the current account would have been considerably smaller.”
Crude oil imports constituted 16% of merchandise imports during the quarter, compared with 5% in the first quarter.
The rand prices of imported goods declined by about 1,5% over the period under review due to the currency’s strength.
According to the bulletin, the deficit was comfortably financed by capital inflows, enabling the central bank to continue its accumulation of foreign-exchange reserves.
An inflow of R25,9-billion was recorded in the second quarter, compared with R14,1-billion in the first.
”The surplus on the financial account during the second quarter of 2004 more than compensated for the growing deficit on the current account,” the report states.
The financial account involves transactions associated with a cross-border change of ownership in financial assets and liabilities.
”The country’s net international reserves rose by R12,1-billion during the second quarter of 2004, following an increase of R13,4-billion in the first quarter.”
The bulletin also reported a GDP figure of 4% in the second quarter, a sign of a growing economy.
GDP expanded for the 23rd consecutive quarter — the longest period of uninterrupted quarter-to-quarter growth since quarterly data became available in 1960.
”That this took pace against a background of ongoing constraints faced by some sectors of the economy was indicative of the inherent resilience of the South African economy,” the report states.
The pace of expansion in real gross domestic expenditure was three times as fast as that of gross domestic production in the second quarter. — Sapa