(Updates with analyst comment in sixth paragraph.)
June 21 (Bloomberg) -- South Africa’s current account deficit widened in the first quarter as weaker global demand and a drop in coal shipments eased growth in exports, while increased consumer spending boosted imports.
The shortfall in the current account, the broadest measure of trade in goods and services, expanded to 3.1 percent of gross domestic product from a revised 1 percent in the previous three months, the Reserve Bank said in its Quarterly Bulletin released in Pretoria today. The surplus on the trade account slumped to 22 billion rand ($3.25 billion) from 75.5 billion rand, it said.
“The value of exports leveled off in response to weaker international demand for domestically produced goods, whereas an expansion in gross domestic expenditure contributed to an increase in the value of merchandise imports,” the bank said.
The deficit has narrowed from 7.1 percent of GDP in 2008, easing South Africa’s reliance on foreign portfolio investment to fund the gap and fueling a 39 percent rally in the rand against the dollar since the end of that year.
The surplus on the financial account surged to 55.1 billion rand in the first quarter from 2.6 billion rand after the government issued global bonds and commercial lenders repatriated money held with foreign banks, the Reserve Bank said.
The rand may come under pressure in the second half of the year, weakening to about 7.5 to the dollar, as capital inflows start to wane, Michael Kafe, an economist at Morgan Stanley in Johannesburg, said by phone. The rand strengthened 0.1 percent to 6.7714 by 11:17 a.m. in Johannesburg.
The median estimate of 16 economists surveyed by Bloomberg was for a current account deficit of 2.8 percent of GDP. The shortfall grew to an annualized 87.8 billion rand in the first quarter from 27.5 billion rand in the previous three months, the central bank said.
Mining exports dropped during the first quarter after a decline in production, particularly at coal mines that were soaked by heavy rains, the central bank said.
Total export volumes slid 3.6 percent in the first quarter, compared with growth of 3.4 percent in the previous three months, the Reserve Bank said. Import volumes increased in the first quarter, rising by 3.1 percent, the bank said.
Foreign portfolio investment recorded an inflow of 20.8 billion rand in the first quarter compared with an outflow of 10.4 billion rand in the previous three months, the Reserve Bank said. The issuance of international bonds offset foreigners selling a net 10.1 billion rand of stocks and bonds, it said.
--Editors: Philip Sanders, Ben Holland, Alastair Reed
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