SA current-account deficit widens

The deficit on South Africa’s current account widened more than expected to 7% in the first quarter of 2009 as exports plummeted sharply on the back of a global recession, the South African Reserve Bank said on Thursday.

The bank said in its June Quarterly Bulletin the gap widened from 5,8% in the fourth quarter of last year, and stood at R163,7-billion, compared with a R137,3-billion shortfall in the previous quarter.

A Reuters poll last week showed the current-account gap was expected to widen slightly to 6% of GDP.

“Since almost half of the country’s merchandise exports are destined for the US, Europe and Japan, the decline in real production in these economies severely affected the volume of merchandise exports in the first quarter of 2009,” the bank said.

Exports plunged by 21% while import volumes decline was not as severe at 8,4%, although it was the largest quarter-on-quarter fall since the first quarter of 1999.

The bank warned that capital imports would likely remain “fairly robust” due to the momentum of capital spending, which should cap the rate of decline in imports.

In terms of value, exports were down 19,4% while imports fell by 13%.

The central bank said the deficit on the services, income and current transfer account narrowed to R110,3-billion from R117,7-billion.

“The level of gross dividend payments in the first quarter of 2009 was almost 16% lower than the average for similar payments in the first nine months of 2008, reflecting the slowdown in economic activity, lower profitability as well as companies’ preference to retain profits for business operations.”

The surplus on the financial account was smaller at R35,3-billion from R39,1-billion in the fourth quarter as investors trimmed their exposure in emerging markets.

Foreign portfolio investment recorded inflows of R10,1-billion in the first quarter after heavy outflows of R57,3-billion in the fourth quarter but investors increased their shareholdings and disposed of debt securities.

Portfolio investments registered outflows for each quarter last year except for the second quarter.

“The favourable investor sentiment towards domestic equity securities partly emanated from the improved outlook for equity returns in view of stimulatory fiscal and monetary packages,” the central bank said in its bulletin.—Reuters