Current Account Deficit Declines; Economy Weakens

Current Account Deficit Declines; Economy Weakens

Lower imports during fourth quarter helped in keeping current account deficit in control. However, the bigger trouble for the economy is the lower spending, which touched low of year 2009 in fourth quarter.

As per the data released by Reserve Bank, the current account deficit declined to 5.1 percent during Q42013. Compared to high of 6.4 percent during third quarter, the current data would give some breather to Reserve Bank and the Ministry of Finance.

The yearly average CAD in 2013 was higher at 5.8 percent compared to 5.2 percent in year 2012. Market experts were expecting lower CAD at 4.7 percent. The decline in fourth quarter could be attributed to lower imports during the last quarter.

In January, the Reserve Bank increased repo rate. Rand has continued the downtrend that started in year 2013. Inflation and higher CAD will be headache for Finance Minister as the country goes for general elections in May this year.

The ongoing strike at platinum mines could spell further trouble for the economy in first quarter. The domestic demand is expected to stay low as people cut on spending during to higher prices.


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