South Africa’s current account deficit narrowed to 5.1% of gross domestic product (GDP) in the last quarter of 2013 from 6.4% in Q3/2013, 6.2% in Q2 and 5.7% in Q1, the South African Reserve Bank (SARB) said in its quarterly bulletin. The current account shortfall stood at ZAR 179bn (EUR 12bn) in Q4 2013, down from ZAR 216bn in Q3 and ZAR 207bn in Q2, however, up from ZAR 187bn in Q1.

In 2013 as a whole, current account deficit to GDP ration increased to 5.8% from 5.2% in 2012 while the deficit widened to ZAR 197bn from ZAR 164bn.

SARB explained that the lower deficit reflected an improvement in the trade balance, which benefited from an increase in demand conditions in the export markets, and mainly from a substantial decline in the value of the merchandise imports.

The trade deficit narrowed to ZAR 45bn in Q4 2013 from ZAR 91bn in Q3, while merchandise imports declined to ZAR 1,002bn from ZAR 1,039bn. Net gold exports declined to ZAR 56bn in the last quarter from ZAR 63bn in the previous quarter. At the same time, the deficit on the services and current transfer account widened from Q3 to Q4 due to lower dividend receipts.

Foreign direct investment into South Africa decreased to ZAR 4.1bn in Q4 from ZAR 47.4bn in Q3 2013 while FDI flows to South Africa rose to ZAR 79.1bn in 2013 as a whole from ZAR 37.5bn a year ago.

In December,Fitch said that South Africa’s current account deficit was expected to widen to 6% of GDP in 2013 and stay above 5% in 2014 and 2015 compared to 5.2% in 2012. According to Fitch, the country is vulnerable to shifts in global liquidity. Fitch also affirmed South Africa's long-term foreign and local currency issuer default ratings (IDR) at BBB and BBB+, respectively, and warned that the country’s rating could be lowered if the government fails to generate faster GDP growth and narrow the current account deficit.