SA's current account deficit widens

The country’s total external debt as a ratio of annual GDP increased from 47.8% at the end of September 2017 to 49.6 % at the end of December, the highest since 2002. (Siphiwe Sibeko/Reuters)

The country’s total external debt as a ratio of annual GDP increased from 47.8% at the end of September 2017 to 49.6 % at the end of December, the highest since 2002. (Siphiwe Sibeko/Reuters)

The country’s trade balance moved from a surplus in the fourth quarter of 2017 to a deficit in the first segment of 2018, causing the current account deficit to widen to 4.8% of the GDP.

It was 2.9% in the previous segment, the South African Reserve Bank (SARB) said on Thursday.

The deficit is the highest since the 4.9 % seen in the first quarter of 2016.

“South Africa’s Q1 Current Account Deficit prints at -4.8% of GDP, which is worse than the expected -3.9%. The rand reacted negatively to the news, and it is currently trading at R13.7400 to the US dollar,” TreasuryONE said in a snap note.

“South Africa’s trade balance switched from a surplus of R74-billion in the fourth quarter of 2017 to a deficit of R25-billion in the first quarter of 2018,” the bank said.

The deficit came after seven consecutive quarterly surpluses.

A slump in mining exports, which was hit by a sharp decline in the rand price of mining commodities was one of the key contributors.

READ MORE: SA’s first-quarter GDP takes a knock, shrinks by 2.2%

The bank stated that the drop in mineral exports was due to iron ore and coal which were affected by the derailment of a train transporting iron ore to the Saldanha harbour.

On January 4 Kumba Iron Ore reported the derailment of a goods train on the Sishen–Saldanha railway line. The incident put the railway line out of service for 3 days.

Core inflation slowed to a six-year low of 4.1 % in March, while the consumer price inflation also ticked upwards in April, following the VAT increase and higher fuel prices.

According to the report, real economic activity in the country contracted sharply in the first quarter of 2018, despite improvements in business and consumer confidence.

Growth in public sector remuneration moderated from a year-on-year rate of 13.6% in the third quarter of 2017 but remained high at 10.6% in the fourth quarter.

“Despite the moderation in public sector wage growth, year-on-year increases in nominal remuneration per worker remained above the upper limit of the inflation target range for all tiers of the public sector,” said the report.

The public sector remuneration growth per worker had accelerated on an annual average basis from 7.0% in 2016 to 11.3% in 2017, while the private sector annual average pay had slowed for five successive years from 7.4% in 2012 to 4.9% in 2017.

Job losses in a slow economic environment had contributed to the downward trend on pay increases.

The country’s total external debt as a ratio of annual GDP increased from 47.8% at the end of September 2017 to 49.6 % at the end of December, the highest since 2002.

The bank said the “significant increase” was driven by non-residents’ increased holdings of domestically issued rand-denominated debt of national government and the government became a significant contributor to total external debt, as a result. — Fin 24

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