CAPE TOWN: South Africa’s current-account deficit widened in the third quarter as exports of the nation’s mining and factory produce fell due to weaker international demand and a stronger currency. The gap on the current account, the broadest measure of trade in goods and services, widened to 4.1 percent of gross domestic product in the three months through Sept. 30 from a revised 2.9 percent in the preceding quarter, the Reserve Bank said in its Quarterly Bulletin released on Friday in the capital, Pretoria. The median of 16 economist estimates compiled by Bloomberg was for a shortfall of 3.6 percent.
Africa’s most-industrialized economy relies mainly on foreign investment in stocks and bonds to help fund the deficit. While the nation averted a credit-rating downgrade to junk this month, foreigners have been net sellers of South Africa’s debt and equity since the start of the fourth quarter, according to data from the Johannesburg Stock Exchange. That was due to increased emerging-market uncertainty after the election of Donald Trump as U.S. president and bets that the Federal Reserve will accelerate the pace of interest-rate increases. Domestic political turmoil also spooked investors. “With the expected Fed interest-rate hike, we could see short-term capital flowing out of emerging-market assets, and that includes South African assets, which could put the currency under pressure and raise the pressure on funding the current-account deficit,” Isaac Matshego, an economist at Nedbank Ltd. in Johannesburg, said by phone. “The Trump administration poses another risk, regarding his stance on trade issues, which could hurt emerging markets in the short term and that could definitely raise the challenge of drawing short- or long-term inflows.”
