PRETORIA (Reuters) – The shortfall on South Africa’s current account narrowed to its smallest in over two years in the first quarter of 2014 as lower dividend payments to offshore investors offset a deterioration in the trade balance, the central bank said on Wednesday.
The deficit was at 4.5 percent on GDP in the first three months of the year, the South African Reserve Bank (SARB) said, compared with a 5.1 percent gap in the fourth quarter and against market expectations for a 6.1 percent shortfall.
A smaller deficit on the services, income and current transfer account had “more than neutralised” the deterioration in the trade balance, rent account of the balance of payments,” the SARB said in its quarterly bulletin.
In rand terms, the shortfall amounted to 161 billion rand, compared with 179 billion rand in Q4.
The trade balance was hit by an increase of 4.4 percent in imports, mainly driven by crude oil, while a five month platinum strike was partly responsible for lacklustre growth of 2.1 percent in the volume of exports in the first quarter.
A weaker rand pushed the value of exports up 7.2 percent in the quarter, compared with just 1.8 percent in the last three months of 2013.
The softer currency also boosted portfolio flows, countering outflows seen at the start of the year when uncertainty around the United States Federal Reserve’s tapering programme hit risky assets.
The rand hit a 5-year low of 11.39 against the dollar earlier in the year, but has recouped some of those losses and traded at 10.84 on Wednesday.
