JOHANNESBURG, Oct. 27, 2010 (Xinhua News Agency) -- The South African government is confident that the country's current account deficit will remain within acceptable limits, Finance Minister Pravin Gordhan said on Wednesday.
According to Gordhan's Medium-Term Budget Policy Statement (MTBPS) tabled in the South African parliament in Cape Town, the country's current account deficit narrowed from 7.2 percent of gross domestic product (GDP) in 2007, to 4.0 percent in 2009.
The South African Press Association (SAPA) reported that thanks to a continued improvement in South Africa's trade balance, the deficit remained relatively small at 3.6 percent of GDP in the first six months of 2010.
As South African domestic and international demand has recovered, export and import volumes have risen. However, they remain at levels well below those prevalent before the global financial crisis.
The minister explained that the improvement in South Africa's current account is expected to be temporary.
The deficit is expected to rise from an estimated 4.2 percent of GDP in 2010, to 4.9 percent in 2011, and 5.8 percent in 2013, driven by rising import demand.
He pointed out that South Africa's net capital inflows currently exceed the country's external funding requirement. Strong capital inflows will ensure that the deficit remains adequately financed over the medium-term.