Johannesburg - South African’s current-account deficit is “stubbornly high” even as the economy has yet to rebound and consumers are pessimistic about the future, Finance Minister Nhlanhla Nene said.
“This in itself is an unusual situation,” Nene said in a speech in Johannesburg today.
“A weak domestic economy and weakening currency would quickly result in narrowing of the current-account deficit. Instead, it has remained stubbornly high.”
The gap on the current account, the broadest measure of trade in goods and services, narrowed to 4.5 percent of gross domestic product in the first quarter, the central bank said on June 18.
GDP contracted an annualised 0.6 percent in the first three months of the year as mining output dropped 24.7 percent, the most in almost half a century.
The rand has weakened 20 percent against the dollar since the start of last year.
A five-month strike at the South African operations of the world’s three largest platinum producers that ended last week has had a significant effect on government revenue, Nene said on June 24.
“In the end, no one benefits, if you look at the long, protracted mining strike, we all stand to lose,” he said today.
“The effects of the first-quarter contraction were quite serious.”
The Federal Reserve’s continued reduction of monthly asset purchases, which is known as tapering of quantitative easing and has helped developing nations lure foreign capital and cover up structural shortcomings, “is likely to continue to unsettle emerging markets,” Nene said.
Economic policy in Africa’s second-largest economy is focused on implementing a 20-year National Development Plan that seeks to cut the jobless rate to 14 percent by 2020 from 25 percent.
The government is targeting a growth rate of 5 percent by 2019, President Jacob Zuma said in his state-of-the-nation speech on June 17.
“It is driven at the highest level and it is given priority in our planning,” Nene said.
“I would have no reason to doubt the commitment and the resolve of government to implement the NDP.”
Standard & Poor’s cut South Africa’s credit rating to one level above junk on June 13, citing concerns that the country’s finances may be harmed by lower-than-forecast economic growth.
Fitch Ratings reduced its outlook on the nation’s creditworthiness to negative from stable.
The government has pledged to narrow the budget deficit to 2.8 percent of GDP in three years’ time from 4 percent in the fiscal year that ended in March. - Bloomberg News