Widening current account deficit threatens rand

Pretoria - The current account deficit widened sharply in the third quarter of this year, Reserve Bank data showed on Tuesday, signalling further pressure on the rand as markets brace for higher US interest rates.

The current account gap has traditionally been partly financed by portfolio inflows, but these have waned this year as investors expecting the US Federal Reserve to start tightening monetary policy dumped emerging markets.

The current account gap expanded to 4.1% of gross domestic product in the third quarter of 2015 from 3.1% in the second, the South African Reserve Bank (Sarb) said in its December quarterly bulletin.

Economists polled by Reuters had reached consensus on a 4% current account shortfall in the third quarter.

Imports rose more strongly than exports during the quarter, leading to a R14bn shortfall in the trade balance following a surplus of the same margin previously, the bank said.

Investment into local stocks and debt had tapered off sharply to R11.8bn in the third quarter from R54.8bn in the prior quarter.

"Non-resident investment in South African equity and debt securities was more than offset by the acquisition of foreign portfolio assets by South African investors," the Sarb added.

The rand, which has weakened more than 20% against the dollar this year, was largely stable after the Sarb report.

The Sarb said spending in the economy, which narrowly avoided a recession in the third quarter and is expected to grow just 1.5% in 2015, ticked up by an annualised 0.8% during the third quarter after contracting by 7.2% previously.

Government spending rose at a slightly faster pace of 1% compared with 0.4% in the second quarter.

This offset a moderation to 0.9% from 1.2% in household spending growth, due to a slowdown in real income expansion and persistently low consumer confidence levels.