Index upbeat despite slip into trade deficit

SA’s trade account slipped into deficit in October. Despite this, an international trade index has shown that business conditions have improved in the country. SA’s trade account swung to a R4.41bn deficit in October, after having recorded a revised R7bn surplus in September. Economists had expected a trade deficit closer to R10bn.

SA’s trade account slipped into deficit in October.

Despite this, an international trade index shows that business conditions have improved in the country.

SA’s trade account swung to a R4.41bn deficit in October, after having recorded a revised R7bn surplus in September.

Economists had expected a trade deficit closer to R10bn.

Exports fell 11% from September to October, with gold and other precious metal exports plunging 25%, vegetable products dropping 48%, and vehicle and transport equipment exports dipping 10%.

SA’s imports amounted to R92.6bn, and it exported goods worth R88.19bn.

The trade deficit stands at R14.35bn for the year to date, compared with R59.5bn over the same period in 2015.

John Ashbourne, an economist at Capital Economics, said that the narrower-thanexpected deficit was positive for the country’s balance of payments position and the rand.

However, economists at Nedbank forecast subdued export growth in the short term because of weak global demand, compounded by low commodity prices. But weak consumer confidence, high debt-service costs and inflation would put imports under strain.

They also expect capital equipment imports to be subdued in the short term.

Jeffrey Schultz, an economist at BNP Paribas Securities, said exports outperforming imports would “keep a lid” on the current account deficit, which he forecast would average 4.2% of GDP in 2016.

On the day the trade figures came out, the World Economic Forum’s Enabling Trade Index showed that SA had improved three points to 55 out of 136 countries.

Although the country scored well for improving its clearance efficiency, its customs control remained mired in corruption, which is a bane for importers and exporters, according to the Global Enabling Trade Report.

HOWEVER, ECONOMISTS AT NEDBANK FORECAST SUBDUED EXPORT GROWTH IN THE SHORT TERM