South Africa's current account deficit to underscore vulnerability

Q1 current account (C/A) data and the GDP expenditure breakdown will be in focus when the South African Reserve Bank (SARB) releases its Quarterly Bulletin on 18 June. 

Despite weaker oil prices in Q1, a limited C/A improvement is expected, highlighting South Africa's dependence on portfolio flows for deficit financing. Fitch (BBB, negative outlook) and S&P (BBB-, stable outlook) highlighted the C/A deficit as a vulnerability in their June rating affirmations. 

SARB trade data, which is based on ownership, typically reflects a more favourable position than the higher-frequency monthly trade data. 

Even so, a poor underlying trade performance and income balance in Q1 should underscore South Africa's ongoing vulnerability to a capital-flow reversal. 

"We expect a 4.8%-of-GDP deficit (consensus: 5.1%; Q4-2014: 5.1%)", said Standard Chartered in a report on Wednesday.