Weaker rand offers some reprieve for trade deficit

THE STRING of trade deficits is unlikely to abate in the near future, although some reprieve is on offer from the relatively weaker rand, according to the latest trade summary prepared by Standard Bank economics researchers, Danelee van Dyk and Shireen Darmalingam. “But for the better part of last year,” the report added, “imports still reigned supreme.” Along with the current level of imports being only a few billion rand away from the highest recorded monthly imports, December’s imports contributed to a recordbreaking R561.24-billion worth of goods imported in 2007. This compared with R462.63-bn in 2006 and translates into an annual increase of 21.3%. Among the import categories that contributed to this record feat, said the Standard team, were mineral products, machinery and mechanical equipment, and chemical products – all of which also reached new highs. Imports of mineral products in 2007, in particular, surpassed 2006’s level by the start of the third quarter of the year – and there was a 23.6% increase in imports of mineral products in 2007 compared to 2006. “A similar trend for imports is envisioned for 2008,” said Van Dyk and Darmalingam. January 2008 presented similar diagnostics to those in 2007. Mineral products continued increasing and came under renewed pressure in February as international oil quotes continued to test new highs and presented a greater need for fuel-powered generators. “Oil prices remain horrendously high and, if sustained, could result in a high oil import bill in 2008,” said the team. “And then there are imports of machinery and mechanical appliances, which increased by an annual 8.2% and by 7.2% monthon- month (m/m) in January. This category, together with mineral products, is the main driver of imports and is expected to continue supporting total imports in February.” While they expect the weakness in the currency to have supported the export position in February – the team’s data suggested that it would not be sufficient to carry the trade account out of deficit territory.