South African current account deficit widens

South Africa’s current account deficit swelled to 6.5 percent of GDP in the second quarter, beset by lower commodity prices and sluggish growth, official data released Tuesday showed.

The Reserve Bank said net capital inflows slowed in the second quarter, putting further pressure on the beleaguered rand.

The deficit widened in line with a “general dampening of capital flows into emerging-market debt securities” amid the promise of US Federal Reserve unwinding asset purchases.

It noted that trade deteriorated notably on account of lower international commodity prices, with export revenues dampened by “lacklustre growth in the volume of non-gold exports.”

Manufacturing export volumes including vehicles also contracted, on the back of weak exchange rates.

The deficit, which jumped from 5.8 percent of GDP in first quarter, was seen by economists as significant, compounded by widening household debt.

Nedbank said the poor balance of payment was likely to persist in the coming quarters.

The bank forecast that the “significant” jump from 5.8 percent in the first quarter will hurt the rand and put pressure on the inflation.

Standard Chartered economist Razia Khan said the data held no good news for growth.

She said the country’s “negative output gap remains in place, and is unlikely to dissipate soon.”

According to Khan, there should see some narrowing of both the trade and current account balances over the coming quarters.

But she warned that the “on-going industrial unrest, and the strength of oil prices pose some risk to the second quarter outlook as well.”