File image: IOL
File image: IOL

South Africa's rand stumbles as data shows struggling economy

By Mfuneko Toyana Time of article published Dec 5, 2019

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JOHANNESBURG - South Africa’s rand was weaker early on Thursday as a batch of economic indicators showed the economy was still on its knees following a surprise third quarter contraction.

At 0940 GMT, the rand was 0.4% weaker at 14.6600 per dollar from an overnight close of 14.6020.

Data from the central bank on Thursday showed the country’s current account deficit narrow slightly but remained large, while a measure of monthly business confidence showed firms were still struggling with the tough economic climate and slack demand.

On Tuesday, the statistics agency said growth shrank 0.6% in the third quarter, raising concerns the country could lose its last investment grade credit rating.

A late night announcement by President Cyril Ramaphosa’s government that loss-making state carrier South African Airways (SAA) would be put into business rescue has yet to affect the currency, but analysts say it may be a net-positive for the country’s fiscal position.

“For now, this will feed favourably into the fiscal reform narrative at a time when the dollar is coming under some pressure,” said ETM Analytics in a note.

That was partly reflected in bond prices, with the yield on the benchmark paper due in 2026 down 1.5 basis points to 8.415%.

South Africa’s current account deficit narrowed to 3.7% of gross domestic product (GDP) in the third quarter from 4.1% in the second three months of the year, central bank data showed on Thursday.

The deficit, which was wider than the 3.1% forecast by economists surveyed by Reuters, is unlikely to stay narrower as the country faces weak economic growth and a tougher export market as the Sino-U.S. trade war drags on.

REUTERS 

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