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The SA Daily 21 June 2018

Q1:18 deficit likely wider

Shireen Darmalingam

  • The Q1:18 current account is due for today; we expect the current account deficit (CAD) to have widened to 3.8% of GDP in Q1:18, from 2.9% in Q4:17. Bloomberg consensus expectations are for a deficit of 3.9%.
  • We’d attribute such q/q deterioration to: 1) SA’s weaker terms of trade; and 2) a deterioration in real trade trends (volumes). The former is due largely to lower export prices but we expect that it does not yet fully reflect the spike in oil prices. The latter was boosted partly by temporary spikes in machinery and oil import volumes.
  • While we expect a wider CAD for 2018, it shouldn’t be quite as wide as in Q1:18 (see report Double whammy by Elna Moolman of 11 June 2018). We forecast the CAD to widen to an average 3.3% of GDP in 2018 (and 3.4% of GDP in 2019), from a previous deficit of 2.5% in 2017. The South African Reserve Bank (SARB) at the most recent Monetary Policy Committee (MPC) meeting in May forecast the CAD to average 3.3% of GDP in 2018 and 3.6% of GDP in 2019.

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