sa foreign trade in shortfall
THE deficit on the current account of South Africa's total foreign trade in goods and services soared to an unexpected 7percent of gross domestic product in the first quarter of 2009, the Reserve Bank said yesterday.
The current account deficit is widely regarded as the Achilles' heel of economic stability because it has to be funded by export sales and incoming foreign investment if the Treasury is to avoid further borrowing to balance its books.
Boosted by infrastructure component imports and falling commodity and goods exports, the deficit jumped to 7,0percent - R163,7billion annualised - in the first three months of this year from 5,8percent in the final quarter of 2008.
It was still below the 7,4percent recorded for 2008 as a whole, the Bank said in its report for the first quarter of 2009.
The report also said there were more pressures on prices than just the increase in food prices or the cost of fuel, which could disappoint hopes for further deep cuts in the Bank's benchmark policy rate of interest.
Stanlib economist Kevin Lings said yesterday's current account figure was considerably worse than most market analysts had expected.
He said the deficit was partially a healthy result of the government's import-heavy programme of infrastructure development, which is currently priced at R787billion over the next three years.
The Bank said the deficit was adequately covered by foreign bond and equity purchases of R10billion and foreign direct investments worth almost R12billion in the period.
But the towering current account deficit was cited by ratings agency Standard & Poors on Wednesday as a reason to maintain a negative outlook on the country's steady sovereign risk ratings.
The Central Bank said the trade balance, which excludes services, had fallen to a deficit of R53,4billion from R35,6billion in the final quarter of last year.
The report included gloomy data on employment, which has been a primary casualty of the global economic slowdown. Private sector retrenchments were, however, partly offset by strong growth in public sector employment.