SA second quarter current account deficit narrows sharply to 3.1%

SOUTH Africa’s current account deficit narrowed more than expected to 3.1% of gross domestic product, or R124bn, in the second quarter from a slightly revised 4.7% (4.8%), or R185bn, in the first quarter, a Reserve Bank’s quarterly bulletin showed on Tuesday. A 3.5% deficit had been expected.

Reserve Bank The narrowing in the current account deficit marked the fourth consecutive quarterly improvement in the current account.

The rand traded at R13.54/$ before the data were released and was at R13.47/$ after the release.

A narrower deficit is good news for SA as it implies fewer rands were needed to finance it, freeing up the funds that would have been used to finance it to be used elsewhere.

Increased global demand and a weaker rand boosted exports while a moderation in domestic demand led to lower imports.

This caused the trade balance, which is one of the components of the current account, to swing from a sharp deficit of R68bn in the first quarter to a R14bn surplus in the second quarter – the first surplus recorded since the fourth quarter of 2011.

The deficit on the other component of the current account, the services, income and current transfer account, widened to R138bn from R117bn in the first quarter. This partly reflected fewer rands received from tourists who stopped travelling to SA partly due to the introduction of new visa regulations.

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