Glimmer of light appears

16 September 2015 - 02:07 By BDLive

At long last, South Africa has some good news on the economic front. The country's current account deficit narrowed more than expected to 3.1% of gross domestic product, or R124-billion, in the second quarter.A narrower deficit is good news as it means fewer rands were needed to finance it, freeing up the funds to be used elsewhere.The deficit was down from 4.7%, or R185-billion, in the first quarter, a Reserve Bank's quarterly bulletin showed yesterday. A deficit of at least 3.5% had been expected.The narrowing in the deficit marked the fourth consecutive quarterly improvement in the current account.The news perked up the rand, which was trading at R13.54 to the dollar before the data was released and at R13.41/$ after the announcement.Also on the plus side, South African bond yields were firmer, with the market following the stronger rand.Increased global demand and a weaker rand over the past few months have boosted exports, while a lessening in domestic demand has led to lower imports.These factors caused the trade balance - one of the components of the current account - to swing dramatically from a sharp deficit of R68-billion in the first quarter to a R14-billion surplus in the second quarter. It was the first surplus recorded since the fourth quarter of 2011.The deficit on the other component of the current account, the services, income and current transfer account, widened to R138-billion from R117-billion in the first quarter. This partly reflected fewer rands being received from tourists, thousands of whom have stopped travelling to South Africa following the government's introduction of onerous new visa regulations.The Reserve Bank also reported that spending in the economy contracted in the second quarter for the first time since the fourth quarter of 2013, reflecting the tough economic conditions that businesses and consumers have been facing.The fall in spending was one of the reasons the economy contracted in the second quarter.Real gross domestic expenditure declined sharply by 7.2% after increasing by 2.7% in the first quarter, the bank said.Growth in spending by households slowed to 1.2% in the second quarter from 2.4% in the first quarter, in line with a drop in consumer confidence and slower real income growth. The modest pace of increase in household spending also led to a slowdown in the growth of household debt. ..

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