The SA Reserve Bank released its Quarterly Bulletin today, showing that weak exports push the current account deficit to the highest level in two years.
According to Nedbank economists Dennis Dykes and Isaac Matshego:
- The current account deficit widened to 4,8% of GDP in the first quarter, the highest level since 5% in the first quarter of 2016, as weak exports pushed the trade account into deficit.
- The financial account surplus widened to 4,5% of GDP from 4,2%.
- The current account deficit is likely to narrow in the remainder of this year as exports benefit from firm global demand and a weaker currency. The deficit for the year as a whole is likely to be just above 3% of GDP.
- These numbers are consistent with recent indicators of real economic activity, which continue to point towards only a modest recovery in overall economic activity. Credit demand remains modest despite the earlier spike in both business and consumer confidence. The inflation rate has remained subdued, although it will pick up following sharp increases of fuel prices and the expected higher increases in electricity tariffs. This, against the backdrop of tightening policy globally will probably keep interest rates on hold in the short term until these trends become clearer. We therefore still expect domestic interest rates will remain unchanged into the second half of 2019, although the risks of near-term tightening in policy have increased.
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