South Africa's trade balance with the rest of the world registered its sixth consecutive deficit in the third quarter of the year, the largest recorded yet, the SA Reserve Bank said on Friday.

The R19.7-billion deficit could largely be ascribed to sustained brisk domestic spending, in turn causing a sharp rise in the value of merchandise imports.

"The higher level of merchandise imports in the third quarter was only partly offset by the improved performance of merchandise exports," says the central bank's quarterly bulletin, released in Pretoria on Friday.

The rising value of imports, it states, "reflects the needs of a growing economy as well as the record high level of the international price of crude oil".

The trade deficit, together with a growing shortfall on the services and income account, caused the ratio of the current account deficit to gross domestic product (GDP) to rise from 3.7 percent to 4.7 percent from the second to third quarters.

This was the highest deficit ratio since the final quarter of 1983, the bulletin said.

But a sizeable net inflow of capital outweighed the larger current account deficit, leaving South Africa's overall balance of payments with a surplus of R4.6-billion.

"Foreign direct investment into South Africa was bolstered by the acquisition of a majority interest in a South African bank by an international banking group, as well as by increased shareholding by a non-resident investor in a domestic telecommunications company," the bulletin says.

"The overall balance of payments remained in surplus in the third quarter, but by a lesser amount than in the second quarter of 2005."

The rand prices of merchandise exports receded by 1.5 percent in the third quarter of the year, mainly due to a drop in international commodity prices, the bulletin says.

This coincided with a five percent increase in the physical quantity of merchandise exports.

The export of motor vehicles rose especially quickly, recording growth of 13.5 percent in the first nine months of the year.

While the physical quantity of gold exports dropped by two percent, earnings rose by 0.5 percent, the bulletin states.

But on the other side of the coin, the rand prices of merchandise imports, driven largely by higher international crude oil prices, rose by two percent and the physical quantity by 5.5 percent.

"The importation of more vehicles, parts and equipment by automobile manufacturers, necessitated by rising domestic and export sales, boosted the overall value of imported manufactured goods while the value of mining products imported also rose markedly from the second to the third quarter as crude oil prices escalated," the bulletin says.

It states that a positive sentiment towards investment in South Africa "continued unabatedly".

The net inflow of capital amounted to R78.5-billion in the first three quarters of the year, compared with R84.6-billion for 2004 as a whole.

Net international reserves rose by R27.7-billion for the first three quarters of 2005.

Sapa

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