Mariam Isa
1 December 2008
Johannesburg — SA's trade deficit widened unexpectedly to R9,8bn last month as oil and machinery imports climbed, but a number of trends are in place which will help the balance to improve in the next few months.
That will in turn ease pressure on the shortfall on SA's large current account, allowing it to shrink significantly next year, which is good news for the volatile rand.
Consensus forecasts from a Reuters poll predicted that the trade gap would narrow to R6bn from R7bn in September, but the data from the South African Revenue Service is volatile.
"Our baseline view remains that the trade account deficit will continue to improve in response to a weaker rand and softer domestic demand," said Barnard Jacobs Mellet economist Elna Moolman.
Continued volatility in prices for commodities and the rand did "not derail our view that the current account deficit will improve in 2009," she said.
The rand was steady on news of the shortfall, after weakening through the key R10/$ mark earlier in the session.
Imports leapt 10,7% from September, and exports by 7,5%, the figures showed. Mineral imports -- mainly oil -- jumped by R2,5bn to R18,8bn, the second- highest on record. Machinery imports rose by R1,6bn to a record R18bn, buoyed by the government's huge infrastructure spending programme.
But dramatic falls in global oil prices and waning consumer demand will help the trade deficit to narrow in the coming year.
Imports of capital goods are also expected to fall as manufacturing and mining companies put expansion plans on hold, in response to plunging commodity prices and the slump in global demand.
At the same time R60bn of net sales in local shares and bonds so far this year -- coupled with lower company profits -- will reduce the dividend payments which pushed the current account deficit up to 7,3% of gross domestic product (GDP) last year. That was a 36-year record.
Nedbank expects the current account deficit to narrow to 6,1% of GDP next year, down from an anticipated 7,5% of GDP this year.
But Absa Capital has a more radical view -- it expects a current account gap of just 3,6% next year, due mainly to an expected slowdown in investment spending. "In our view, this could reduce the risk of rand depreciation," it said.
In the year to date, the trade deficit was R72,3bn -- not much wider than R71bn at the same time last year, the data showed.
SA has recorded a monthly trade deficit for nearly two years running.
But Stanlib economist Kevin Lings said that over the past 12 months the gap had been trending lower, which should be expected given the sharp slowdown in the domestic economy.
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