South African Current-Account Gap Narrows Less Than Projected

(Bloomberg) --

South Africa's current-account deficit narrowed less than forecast in the third quarter as outflows to foreign shareholders increased.

The shortfall on the current account, the broadest measure of trade in goods and services, shrank to 3.7% of gross domestic product from a revised 4.1% in the previous period, the Reserve Bank said in a report released Thursday in Pretoria. The median estimate of 11 economists' estimates in a Bloomberg survey was for a deficit of 3%.

Key Insights

• The main driver of the bigger-than-expected gap was a surge in the shortfall on the nation's primary-income account, which reflects outflows due to dividends and interest payments to foreign shareholders. Naspers Ltd., South Africa's biggest company by market capitalization, listed its internet business in Amsterdam in September.
• The trade account swung back to a surplus of 41.1 billion rand ($2.8 billion) as the rand value of exports increased in the quarter. Most of this was due to the currency's 6.9% drop against the dollar in the three-month period, as shipment volumes only rose marginally. Import volumes declined.
• The current-account deficit hasn't dipped below 2% of GDP since the end of 2016 and, together with a budget shortfall that's projected to be the widest in more than a decade next year, it will keep pressure on the rand. South Africa relies on portfolio inflows to fund the gap on the current account.

To contact the reporter on this story: Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net

To contact the editors responsible for this story: Benjamin Harvey at bharvey11@bloomberg.net, Gordon Bell, Hilton Shone

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