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21 Aug 2018

SARB QB update: Current account deficit widens to -2.9% of GDP in Q4.17 from -2.1% previously

Annabel Bishop

Chief Economist

Figure 1: Balance of payments: current account
  • The current account deficit widened to R137bn in Q4.2017 from R99bn in Q3.2017. Expressed as a percentage of GDP, the deficit widened to -2.9%, in Q4.2017 from -2.1% in the previous quarter. This was against consensus expectations of a deficit of -2.0%.
  • The broadening of the deficit was underpinned by the Q4.17 trade dynamics. The trade account registered a surplus of R74bn in Q4.17, down from R92bn in Q3.2017. The value of merchandise imports rose 8.9% in excess of net gold and merchandise exports. “These increases were largely driven by higher volumes of both imported and exported goods”, according to the Reserve Bank (SARB).
  • Expressed as a percentage of GDP, the trade surplus declined to 1.5% in Q4.2017 from 2.0% previously.
  • The shortfall on the services, income and current transfer account widened for the fourth consecutive quarter to R211 billion Q4.2017. This together with the reduced trade surplus led to the notably wider current account balance.
  • “An increase in net dividend payments to non-residents was mainly responsible for the larger deficit on the income account in the fourth quarter of 2017 as gross dividend payments increased while gross dividend receipts declined”, stated SARB
  • We expect the current account deficit to remain within 2 – 4% of GDP over the next few years, as the PMI and other global indicators signal further strengthening in international trade conditions. On the domestic front, consumer and business confidence have improved and import growth is expected around 5.0% y/y with the economy only expected to record growth of 1.5 – 2.0% y/y in 2018.
Figure 2: Balance of payments on current account (R’bn seasonally adjusted and annualised)