Q4 current account deficit widens as strong rand boosts imports
South Africa's current account deficit widened more than expected to 2.9% of GDP in the fourth quarter due to a smaller trade surplus driven by a rally in the currency late last year, central bank said on Tuesday.
The rand has appreciated by about 20% against the dollar since mid-November, in the run-up to the election of Cyril Ramaphosa as leader of ruling African National Congress in December.
The bank said the stronger currency was among the main reasons for the faster increase in imports, although continued global demand for commodities helped soften the blow.
In its Quarterly Bulletin for Q4 2017, the bank said the nominal effective exchange rate of the rand increased 8.3% in the final quarter of 2017, the largest increase since early 2009.
The nominal effective exchange rate is a weighted average rate at which a country's currency exchanges for a basket of multiple foreign currencies.
The value of imports was up 8.9% in the quarter and increased 7.1% in volume.
"Both export and import volumes increased but the deterioration in the current account from the third to the fourth quarter was mostly driven by volume increases in imports," said senior economist central bank Piet Swart.
The trade surplus shrunk, falling to R74-billion from a revised R92-billion in the prior quarter, the Reserve Bank said, while foreign direct investment fell due to the sale of a significant stake in local bank Absa by British based Barclays.
FDI recorded an outflow of R13.5-billion in the last quarter of 2017 from an inflow of more than R16-billion in the quarter before that.
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