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.
South Africa 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 15.42 against the dollar on Tuesday. The yield on rand-denominated government bonds due December 2026 rose five basis points to 9.34%.
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 R57 billion ($3.7 billion) in the fourth quarter as exports, excluding gold, fell 3% to R969 billion. Imports rose 1.1% to R1.1 trillion 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%.
“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. “It seems there’s more bad news in the pipeline.”
Foreign investment in stocks and bonds swung to an outflow of R300 million in the fourth quarter from an inflow of R11.8 billion in the previous three months, while foreign direct investment fell 14% to R13.7 billion.
