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Q4 current account deficit narrows to 2.2% of GDP

SA’s current account and budget deficits have widened in recent years as tax revenues and fixed investments stalled.

South Africa‘s current account deficit narrowed to 2.2% of gross domestic product (GDP) in the fourth quarter, from a revised 3.7% in the third quarter, central bank data showed on Thursday.

Africa‘s most advanced economy is heavily reliant on portfolio inflows to finance gaping current account and budget deficits that have widened in recent years as tax revenues and fixed investments stalled, mainly over weak economic growth and policy uncertainty.

The rand was largely unmoved soon after the release, trading at 14.28 per dollar.

In January the rand advanced more than 5% against the dollar as signs the United States’ central bank would keep lending rates low spurred a flood of money into emerging markets.

The currency has since softened as the crisis at state utility Eskom put the brakes on demand.

The quarterly trade balance showed a larger surplus of R71.8 billion ($5.03 billion) in the three months to the end of December, from a surplus of R10.2 billion in the previous three months.

The central bank said the improved trade balance was due to the higher value and volume of exports while the price of imports declined. SouthAfrica‘s terms of trade, however, deteriorated due to the weaker currency.

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