S.Africa's trade deficit narrower, pressure seen

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July 1, 2010 5:09 AM EST

South Africa's trade deficit narrowed sharply in May as exports rose despite transport sector strike, the South African Revenue Service said on Wednesday, but the outlook for key markets remains cloudy.

SARS said the trade gap narrowed to 302 million rand compared with a 1.9 billion rand shortfall in April.

Analysts had expected a wider deficit of 2.5 billion rand in a Reuters poll after a strike at logistics company Transnet

brought port and rail traffic to a standstill for three weeks in May.

Exports were up 6.8 percent compared with the previous month, while imports rose by 3.1 percent., SARS said.

"A surprisingly benign trade deficit for May - in a month marked by transport worker strikes. This will be seen as marginally positive for the rand," said Razia Khan, head of Africa research at Standard Chartered.

"But ... with signs of renewed weakness in the forward looking sentiment indicators of some of South Africa's key trading partners (most notably in Europe), the sustainability of a favourable export performance is not a given." she added.

Exports fell in the first quarter mainly due to economic growth worries in the euro zone, South Africa's main trading partner, the central bank said last week.

While the outlook for exports is uncertain, imports are likely to rise over the next few months as a local economic recovery gains momentum, putting pressure on the trade account, analysts said.

SARS also said the cumulative trade deficit so far this year was at 12.42 billion rand compared with a 19.82 billion rand gap between January and end-May last year.

The rand was little changed at 7.6478 against the dollar at 1234 GMT compared with 7.6440 before the data was released at 1200 GMT. The yield on the 2015 bond was steady at 8.045 percent.

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