SA import growth to be restrained by weak domestic economic activity
CAPE TOWN – South Africa’s current account deficit deteriorated by R32.3 billion to R142.5bn in the first quarter of 2019 compared with a deficit of R110.2bn in the fourth quarter of 2018.
The SA Reserve Bank (Sarb) reported on Thursday that the current account deficit widened to 2.9 percent of gross domestic product (GDP) from 2.2 percent in the previous quarter.
The outcome was somewhat better than market expectations with moderate deterioration in both the trade and services accounts registered, according to NKC analyst Elize Kruger.
“Although the outcome for the first quarter was better than market expectations, the current account deficit still deteriorated somewhat. Intensifying global trade tensions could depress South Africa’s trade performance further in coming quarters. We forecast a current account deficit of 3.8 percent of GDP for 2019 vs a deficit of 3.5 percent in 2018,” said Kruger.
Investec economist Kamilla Kaplan said looking ahead, import growth was likely to remain restrained by weak domestic economic activity, particularly the weak rates of fixed investment, and by extension weak demand for capital goods imports.
“Additionally, international oil prices have retreated. South Africa’s export performance is at risk of flagging in view of weaker-than-expected global growth and heightened US-China trade tensions that are weighing on commodity prices, particularly metals prices,” said Kaplan.
The trade surplus narrowed from R71.8bn in the fourth quarter of 2018 to R43bn in the first quarter of 2019. The deterioration in the trade balance reflected lower values of both merchandise imports and exports, though the latter declined by more, according to Sarb.
The lower value of merchandise exports was due to lower volumes, while lower volumes and prices weighed down the value of imported goods.
BUSINESS REPORT ONLINE