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Johannesburg - South Africa’s current-account deficit widened more than economists estimated, reaching 5.1% of gross domestic product in the fourth quarter as exports declined despite a weaker rand and dividend receipts from abroad decreased.
The gap on the current account, the broadest measure of trade in goods and services, increased from a revised 4.3% in the previous three months, the Reserve Bank said in its Quarterly Bulletin released on Tuesday in Pretoria.
The deficit was forecast to reach 4.4%, according to the median estimate of 12 economists surveyed by Bloomberg.
A worsening in the trade outlook threatens to undermine the rand further after it fell 11% against the dollar in the past six months.
SA relies mainly on foreign investment in stocks and bonds to help fund the current account shortfall, inflows that declined in the fourth quarter as investor confidence weakened.
“The fact that the deficit has been above 3% for some years keeps the pressure on the rand,” Christie Viljoen, an economist at KPMG, said on Tuesday. “This is yet another data set which tells us we have a lot of work to do to fix this economy.”
The rand weakened 1.1% to 15.4201 against the dollar as of 11:20 on Tuesday. The yield on rand-denominated government bonds due December 2026 rose five basis points to 9.34%.
READ MORE: Rand drifts lower ahead of current account data
The deficit for 2015 narrowed to 4.4% of GDP from 5.4% in the previous year. The government is forecasting a shortfall of 4% this year.
The trade gap more than doubled to R57bn in the fourth quarter as exports, excluding gold, fell 3% to R969bn. Imports rose 1.1% to R1.1trn in the period.
“Even though the depreciation in the exchange value of the rand boosted the export earnings of domestic producers, the benefits thereof were more than fully negated by a further decline in the international prices of South African export commodities in the fourth quarter,” the Reserve Bank said.
While the weakening in the exchange rate in the fourth quarter helped to boost spending by foreign tourists, it will also add to costs in the economy, according to the central bank. Inflation accelerated to a 17-month high of 6.2% in January, exceeding bank’s target band of 3% to 6%.
‘Bad news’
“Inflation pressures intensified in recent months and it’s already outside the target range,” Johan van den Heever, head of economic reviews and statistics in the central bank’s research department, said on Tuesday. “It seems there’s more bad news in the pipeline.”
Foreign investment in stocks and bonds swung to an outflow of R300m in the fourth quarter from an inflow of R11.8bn in the previous three months, while foreign direct investment fell 14% to R13.7bn.
Consumption improved last quarter, with growth in spending by consumers, the government and businesses accelerating to an annualised 4.3% from 1.4% in the third quarter. Household spending, which makes up about two-thirds of expenditure in the economy, rose 1.6%, up from 0.9% in the previous three months.
Finance Minister Pravin Gordhan last month cut this year’s GDP growth forecast by almost half to 0.9% as the worst drought in more than a century, a slowdown in expansion in South Africa’s biggest export market, China, and falling commodity prices weigh on output.
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