South Africa Posts 6% Current-Account Gap in Third Quarter

South Africa posted a current-account deficit of 6 percent in the third quarter, higher than economists predicted, as exports remained under pressure. The rand slumped against the dollar.

The gap on the current account, the broadest measure of trade in goods and services, narrowed to 6 percent of gross domestic product from a revised 6.3 percent in the previous three months, the Reserve Bank said in its Quarterly Bulletin released today in the capital, Pretoria. The median estimate of 16 economists in a Bloomberg survey was 5.8 percent.

Africa’s second-biggest economy has struggled to rebound after strikes in mining and manufacturing this year, coupled with power blackouts, curbed export growth. The deficit is a key risk for the rand as foreign portfolio inflows needed to fund the shortfall come under pressure in the face of tighter U.S. monetary policy.

The data “emphasizes the ongoing imbalances of our economy,” Ilke van Zyl, an economist at FirstRand Ltd.’s investment banking unit, said in Pretoria after the release of the data. “To have a 6 percent deficit, even though it is narrowing, is far beyond the level we can sustain.”

The rand dropped as much as 1.1 percent to 11.4815 against the dollar after the data. It was trading at 11.4643 as of 11:43 a.m. in Johannesburg, taking its decline this year to 8.6 percent.

Strike Impact

Export volumes, excluding gold, rose 3.3 percent in the three months through September as output recovered from a five-month strike at platinum mines in the first half of the year, the Reserve Bank said. A four-week strike by workers in the steel and engineering industries in July cut the nation’s growth rate by 1.7 percentage points in the third quarter, the bank said.

“Despite weak growth in South Africa, the current account deficit remains problematic,” Razia Khan, head of Africa economic research at Standard Chartered Plc in London, said in an e-mailed note to clients. “The outlook for future growth is weak.”

Consumer spending remained muted, increasing an annualized 1.3 percent in the third quarter from 1.1 percent in the previous three months. Expenditure by the government, households and businesses increased 2.6 percent from 0.5 percent in the second quarter.

Credit Rating

Last month’s revisions to gross domestic product data will help to improve debt ratios, the central bank said. Gross government debt in the fiscal year through March 2015 is now estimated at 46.1 percent of GDP, compared with the forecast of 48.2 percent published in the mid-term budget in October, the Reserve Bank said.

The more favorable ratios probably won’t influence the views of credit-rating companies, Johann van Tonder, an economist at the University of South Africa’s Bureau for Market Research, said today in Pretoria.

Moody’s Investors Service downgraded South Africa last month to Baa2, the second-lowest investment grade, citing slower economic growth and rising government debt. Standard & Poor’s and Fitch Ratings Ltd. will publish their rating reviews on Dec. 12.

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