Johannesburg - South Africa’s current-account deficit unexpectedly narrowed in the first quarter of the year even as a protracted platinum strike led to a slump in mining output.
The gap on the current account, the broadest measure of trade in goods and services, shrank to 4.5 percent of gross domestic product from 5.1 percent in the previous three months, the Reserve Bank said in its Quarterly Bulletin released today in the capital, Pretoria.
The median estimate of 22 economists in a Bloomberg survey was 6 percent.
The shortfall reached an annualised 161 billion rand in the period.
The improvement in the shortfall came from lower dividend payments made to foreign investors, helping to offset a deterioration in the trade deficit as a weaker rand boosted import prices.
The rand lost 3.2 percent against the dollar since the start of the year, the worst performer of 16 major currencies tracked by Bloomberg.
Standard & Poor’s cut South Africa’s credit rating on June 13 to BBB-, one level above junk, concerned that slower growth will undermine efforts to rein in deficits on the current account and government budget.
Fitch Ratings lowered its outlook on the nation’s BBB grading to negative on the same day.
“The deficit on the current account of the balance of payments is often regarded as the Achilles heel of the South African economy,” Reserve Bank Governor Gill Marcus said last week.
Foreign Inflows
The trade gap increased to 75 billion rand in the first quarter from 45 billion rand in the previous three months.
Export volumes rose 2.1 percent in the period as higher shipments of manganese ore and ferrochrome offset a slump in platinum output amid a 20-week strike.
South Africa relies mainly on inflows from abroad into bond and stock markets to help finance the current-account gap.
Portfolio investment inflows from non-residents reached 12.3 billion rand in the first quarter, while foreign direct investment almost doubled to 8 billion rand, the bank said.
While growth in Africa’s second-largest economy is slowing because of the platinum strike and electricity shortages, consumer and investment spending is also under pressure.
Growth in household expenditure eased to 1.8 percent in the first quarter from 2 percent in the previous three months, while investment rose 2.6 percent from 3.1 percent. - Bloomberg News