19 March 2012
South Africa’s current account deficit narrowed to 3.6% of GDP in the fourth quarter of 2011, while foreign direct investment inflows increased substantially, the Reserve Bank says in its latest quarterly bulletin.
“Relative to the country’s gross domestic product, the deficit on the current account decreased from 4.1% in the third quarter of 2011 to 3.6% in the fourth quarter,” the Bank said on Monday.
According to the bulletin, this was helped by lower dividend payments to non-residents.
“Relative to the country’s gross domestic product, the deficit amounted to 3.6% – fairly moderate compared with recent history,” the Bank said.
‘Significantly lower gross dividend payments’
“The smaller deficit in the fourth quarter of 2011 can mainly be ascribed to significantly lower gross dividend payments following exceptionally large dividend declarations in the third quarter.”
According to the Bank, the negative imbalance on the services, income and current transfer account narrowed noticeably, by about R45-billion to R93-billion in the fourth quarter.
The current account deficit for the whole of 2011 widened to 3.3% of Gross Domestic Product (GDP) from 2.8% in 2010. This was due to a sharp deterioration in the second half of last year.
Foreign direct investment increases
Meanwhile, foreign direct investment inflows into South Africa increased substantially, to R18.7-billion in the fourth quarter of 2011, compared with an inflow of R2.8-billion in the third quarter.
According to the central bank, the capital inflows emanated mainly from the UK and China, and were largely directed towards the country’s mining, communications and financial intermediation sectors.
“Cumulatively, direct investment inflows came to R42.1-billion in 2011, notably more than the inflow of R9-billion registered in 2010,” the Bank said. “As a ratio of gross domestic product, the direct investment inflows rose from 0.3% in 2010 to 1.4% in 2011.”