SA's current account deficit narrows down to 6.0% of GDP

Revisions add R67Bn to net payments, raising the CAD for 2014 to 5.7% of GDP

The current account narrowed from a revised R234.6Bn or 6.3% of GDP in Q2:14 to R229.7Bn or 6.0% of GDP in Q3:14, primarily due to a recovery in nominal GDP and a narrower trade balance. Net service, income and transfer payments rose by R3Bn versus the second quarter.
Compared with the same quarter last year, the current account deficit widened, from R228.6Bn, due to a wider trade balance, while net service, income and transfer payments decreased by R2Bn. However, due to an R252Bn increase in nominal GDP, the deficit fell from 6.4% to 6.0% of GDP.
The December Quarterly Bulletin reflects a number of conceptual and presentational changes alongside a longer term revision of transactions with the rest of the world, affecting the sub accounts of the BOP. Consequently several revisions have been made to the historical BOP data, including a widening of the quarterly CAD (figs 1, 2 & 3).
Revisions to the 2013 trade balance resulted in an R6Bn reduction; however this was more than offset by an R11Bn increase in net service, income and transfer payments such that the CAD widened to R204Bn, from R197Bn, but remained at 5.8% of GDP for the year.
Revisions to H1:14 resulted in the average CAD widening from 5.4% to 5.6% of GDP. Including Q3:14, this brings the average CAD YTD to 5.7% of GDP.
The trade deficit narrowed by R7.7Bn in Q3:14 to R92.6Bn versus R100.3Bn (revised from R101Bn) in Q2:14, but widened by R3Bn versus the R90Bn (revised from R91Bn) deficit recorded in the third quarter of last year. Revisions to the trade account were quite marginal over the past 4 quarters (fig 3).
The terms of trade recorded a slight improvement during the quarter as export prices did not decline as fast as import prices. The terms of trade index declined 1.3% y/y versus -6.3% y/y in Q2:14 (fig 4). Quarter-on-quarter the terms of trade grew 1.6% in Q3:14, up from -0.5% in Q2.
Net service, income and transfer payments decreased to R137Bn, from R139Bn (revised from R125Bn) in Q3:13 and increased from R134Bn (revised from 121Bn) in Q2:14 (fig 3). This sub account was revised quite substantially and the total increase in payments to the rest of the world over the four quarters (from Q3:13 to Q2:14) was R67Bn (fig 2).
According to the SARB, capital flows to emerging-market economies remained firm as the carry in those markets remained attractive. South Africa recorded a net capital inflow of R58.3Bn in Q3:14, up from R51.8Bn in Q2:14, driven by portfolio investment, which almost doubled to R50.8Bn from R27Bn in Q2:14, as foreign investors acquired domestic equity and debt securities in roughly equal proportions. Foreign buying increased external debt to 40.2% of GDP in Q2:14.

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