South Africa’s current-account deficit decreased to 6,5% of the gross domestic product in the second quarter of the year, down from 6,9% in the first, the South African Reserve Bank said in its quarterly bulletin published on Thursday.
This was mainly due to the raised demand for South African exports in the second quarter, which combined with slower growth in domestic expenditure and a contraction in the physical quantity of merchandise imports meant that the trade deficit narrowed to R31,4-billion in the second quarter.
The bank said the net service, income and current-transfer payments to the rest of the world ”rose considerably” to R93,8-billion in the second quarter, offsetting much of the improvement in the trade account.
The current-account deficit of the balance of payments narrowed from R130,5-billion in the first quarter to R125,2-billion in the second quarter.
”The deficit on the current account continued to be more than fully financed by the financial inflows from abroad,” the bank stated.
The net inflow of capital related to balance-of-payments transactions increased from R32,5-billion in the first quarter of the year to R47-billion in the second quarter.
The total net inward movement of foreign capital amounted to 2,4% of the gross domestic product.
Portfolio capital continued to dominate inward capital flows amounting to R42-billion in the second quarter, but direct investment also picked up from R3,8-billion in the first quarter to R12-billion in the second. Other investments grew to R18,8-billion.
Following an extended period of expansion at annualised rates of more than 7%, household consumption expenditure rose at a more sedate pace of 5,5% in the second quarter of 2007, the bulletin showed.
Real gross domestic expenditure slowed from a rate of 5,75% in the first quarter to 1% in the second.
”This slowdown reflected slower growth in real domestic final demand and a further slowdown in inventory accumulation,” the bank said.
All three components of final demand — final consumption expenditure by households and general government and gross fixed capital formation -‒ lost momentum in the second quarter.
Growth in consumption expenditure by general government slowed down dramatically from 14% in the first quarter to 3% in the second.
This was partly due to the public-service strike.
”Strike action by civil servants also weighed on real expenditure and real production of government services, and simultaneously bolstered the number of man days lost due to strike action to 11,5% in the first half of 2007,” the bank said.
Gross fixed capital formation increased at slower rate to 14,25% in the second quarter, down from 21,75% in the first. – Sapa