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Current account deficit widens in Q1 as exports slump

21st June 2018

By: Reuters

  

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South Africa's current account deficit widened more than expected in the first quarter to register its largest shortfall in two years as the trade balance swung to a deficit after a steep decline in exports, the central bank said on Thursday.

Investor sentiment in South Africa picked up after President Cyril Ramaphosa pledged to clean up poor governance that critics say beset the administration of his predecessor Jacob Zuma.

But a string of poor data, including the worst quarterly GDP contraction in nine years in the first quarter, has raised concerns over the recovery in the economy.

In response to news of the widening deficit, the rand extended its losses to the dollar, trading at 13.7575 at 0822 GMT from 13.6875.

The South African Reserve Bank said in its quarterly bulletin the current account deficit widened to 4.8% of gross domestic product in the first quarter from 2.9% in the fourth quarter of last year.

The deficit was the largest since the first quarter of 2016 and wider than the average forecast by economists surveyed by Reuters, who had expected it at 3.8% of GDP.

The quarterly trade balance swung to a deficit of R25-billion ($2-billion) from a surplus of R74-billion as the value of exports fell sharply, the central bank said.

"The value of merchandise exports was affected by both lower export volumes and lower rand prices as the external value of the rand strengthened," the bank said.

Edited by Reuters

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