South Africa's current-account deficit widened to 3.7% of GDP in the third quarter of 2010, from a multi-year low of 2.4% of GDP in the second quarter, owing mainly to a rise in the invisible deficit (on services, income and current transfers). This reflects deterioration in the services balance after the World Cup, when tourism climbed, and a rise in income payments to foreign portfolio investors (in line with higher portfolio inflows). Exports (up 22% year on year) and imports (up 21%) both grew quickly in the third quarter, and the trade balance stayed in surplus. Comparing the first three quarters of 2010 with a year earlier, the invisible deficit was largely unchanged while the trade surplus increased, reducing the current-account deficit to 3.4% of GDP (from 4.4% of GDP in the same period in 2009). The gap is therefore much smaller than pre-recession levels (which surpassed 7% of GDP in 2007 and 2008) and remains comfortably financed by capital inflows. This poses a degree of risk, however, as portfolio flows can be volatile and short-term. Portfolio inflows surged by 79% to R118bn (US$17bn) in the first three quarters of 2010, while foreign direct investment (FDI) inflows slipped by 83% to R7bn (US$1bn)-although fourth-quarter FDI will be much higher following the acquisition of an information technology company, Di-Data, by Japan's NTT for about R22bn (US$3.1bn).

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