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Pretoria - South Africa's current account deficit was wider than expected in the last months of 2012, hit by a weak rand as mining strikes dented investments, and it may be hard to plug if portfolio inflows fail to match last year's levels.
The country's currency hit a four-year low against the dollar following the data, the latest indicator of an economy that is struggling for growth in the face of subdued local and foreign demand for South African products.
That also reflected market concerns that last year's strong inflows into South African stocks and bonds were in part due to one-off factors, notably the increased demand for local debt resulting from its inclusion in Citibank's widely tracked global Government Bond Index.
"The rand's brief weakening ... is a sign of investors' concern about the level of the current account deficit and more importantly, South Africa's means of financing this," said Vivienne Taberer, portfolio manager at Investec Asset Management.
The current account gap was at 6.5% of gross domestic product in the fourth quarter compared with an even bigger 6.8% in the third, the Reserve Bank said on Tuesday in its quarterly bulletin.
The Treasury said it expects the wide shortfall to persist, averaging 6.2% over the next three years.
Investors dumped South African bonds and the local currency towards the end of last year, while credit agencies downgraded the country's sovereign rating in the wake of the often violent strikes that began in August, hitting output from mines.
But the fourth quarter current account gap was covered by financial inflows in the form of short-term loans to local banks and an increase in non-resident deposits.
"Net portfolio investment made a small positive contribution, whereas net direct investment registered an outflow of capital during the quarter," the Reserve Bank said.
Economists polled by Reuters had expected a fourth quarter deficit of 6.3%.
Rand Breaches 9.2
The rand hit a session low of R9.2125/$ after the data - breaching the psychologically key 9.2 level - from R9.1047/$ beforehand. It was at R9.1340/$ in late Johannesburg trade, down 0.5% from Monday's close.
Despite tapering off towards year-end, the economy still saw record foreign inflows of R90bn into bonds and equities in 2012.
But last year's boost to fixed-income investments from membership of the Citibank index will not be repeated.
"The funding of the deficit is therefore likely to remain a challenge for South Africa and an area of concern for investors if growth and productivity do not improve from the current levels," Investec Asset Management's Taberer said.
South Africa's Treasury cut the GDP growth forecast for this year to 2.7% from 3.0%, partly due to subdued demand from key markets in Europe.
Spending in the fourth quarter contracted by 0.9% after growing 4.1% previously, the Reserve Bank said - the first decline since 2009 when Africa's biggest economy was in recession.
The drop was due to a fall in government spending and a sharp contraction in real inventories.
Growth in household spending, historically a key driver of the economy, slowed to 2.4% in the quarter, constrained by a slow increase in disposable incomes and rising inflation.
The country's currency hit a four-year low against the dollar following the data, the latest indicator of an economy that is struggling for growth in the face of subdued local and foreign demand for South African products.
That also reflected market concerns that last year's strong inflows into South African stocks and bonds were in part due to one-off factors, notably the increased demand for local debt resulting from its inclusion in Citibank's widely tracked global Government Bond Index.
"The rand's brief weakening ... is a sign of investors' concern about the level of the current account deficit and more importantly, South Africa's means of financing this," said Vivienne Taberer, portfolio manager at Investec Asset Management.
The current account gap was at 6.5% of gross domestic product in the fourth quarter compared with an even bigger 6.8% in the third, the Reserve Bank said on Tuesday in its quarterly bulletin.
The Treasury said it expects the wide shortfall to persist, averaging 6.2% over the next three years.
Investors dumped South African bonds and the local currency towards the end of last year, while credit agencies downgraded the country's sovereign rating in the wake of the often violent strikes that began in August, hitting output from mines.
But the fourth quarter current account gap was covered by financial inflows in the form of short-term loans to local banks and an increase in non-resident deposits.
"Net portfolio investment made a small positive contribution, whereas net direct investment registered an outflow of capital during the quarter," the Reserve Bank said.
Economists polled by Reuters had expected a fourth quarter deficit of 6.3%.
Rand Breaches 9.2
The rand hit a session low of R9.2125/$ after the data - breaching the psychologically key 9.2 level - from R9.1047/$ beforehand. It was at R9.1340/$ in late Johannesburg trade, down 0.5% from Monday's close.
Despite tapering off towards year-end, the economy still saw record foreign inflows of R90bn into bonds and equities in 2012.
But last year's boost to fixed-income investments from membership of the Citibank index will not be repeated.
"The funding of the deficit is therefore likely to remain a challenge for South Africa and an area of concern for investors if growth and productivity do not improve from the current levels," Investec Asset Management's Taberer said.
South Africa's Treasury cut the GDP growth forecast for this year to 2.7% from 3.0%, partly due to subdued demand from key markets in Europe.
Spending in the fourth quarter contracted by 0.9% after growing 4.1% previously, the Reserve Bank said - the first decline since 2009 when Africa's biggest economy was in recession.
The drop was due to a fall in government spending and a sharp contraction in real inventories.
Growth in household spending, historically a key driver of the economy, slowed to 2.4% in the quarter, constrained by a slow increase in disposable incomes and rising inflation.
