South Africa's Q3 current account deficit widens to 4.1 pct of GDP

PRETORIA (Reuters) - South Africa’s current account deficit widened to 4.1 percent of gross domestic product in the third quarter of 2016 from a revised deficit of 2.9 percent in the second quarter, the central bank said on Friday.

Gold bars are displayed at South Africa's Rand Refinery, file. REUTERS/Siphiwe Sibeko

Exports fell during the quarter, resulting in a trade deficit of 4 billion rand ($291.5 million) compared with a revised surplus of 48 billion rand in the second quarter, the Reserve Bank said in its December quarterly bulletin.

The bank said the deficit in the current and trade accounts were due to weaker global demand for the country’s goods.

“Export earnings were also affected by the strengthening in the exchange value of the rand which more than offset the benefit arising from higher international commodity prices,” the bank said.

The rand extended its losses in response to the data, falling 0.75 percent to 13.7450 per dollar at 0812 GMT.

The bank said fixed investments by companies decreased for a fourth consecutive quarter, declining 1 percent after a 6.8 percent fall in the previous quarter as private businesses in particular cut down on spending.

The prolonged decline in real capital expenditure by private businesses - comprising nearly two-thirds of total capital investment - was driven by subdued economic conditions and low business confidence, the bank noted.

Africa’s most industrialised economy is struggling to attract investment, with sentiment dimmed by political uncertainty, weak growth that has hit consumer activity, as well as the looming threat of credit downgrades to junk.

“The economy would have to turn before you see any kind of investment drive,” said senior analyst at the bank Johan van den Heever.

On Tuesday data showed the economy had barely advanced, expanding by 0.2 percent in the third quarter as manufacturing contracted sharply.

A Reuters poll sees the economy expanding 1.1 percent next year from a forecast 0.4 percent growth in 2016, well below the 5 percent annual growth government is targeting in bid to lower soaring unemployment and a growing budget deficit.

The country dodged widely expected downgrades of its sovereign credit score to subinvestment, with S&P Global Ratings, Fitch and Moody’s all affirming its investment status, albeit with a negative outlook.

($1 = 13.7233 rand)

Reporting by Mfuneko Toyana; Editing by James Macharia