South Africa’s large current-account deficit is a major chink in its armour given a low savings rate and current global financial market turmoil, Finance Minister Trevor Manuel said on Monday.
The country was dependent on foreign capital inflows to fund a rising deficit, he said.
South Africa’s current-account deficit swelled to 8,1% of GDP in the third quarter of 2007, and is expected to stay around those levels for at least the next three years.
Data due on Wednesday is likely to confirm a deficit of more than 7% for the year as a whole, which would be a new near three-decade record.
”I have to repeatedly … mention the deficit on the current account,” he said at a tax symposium.
”The gap of just over 7% between our investment rate of just over 21,2% of GDP, compared to our 13,8% savings rate is the major chink in our armour, somewhat accentuated by the current turmoil on global financial markets.”
”We are dependent on foreign capital inflows to fund our rising current account deficit of 7,4% in 2007,” Manuel said.
The deficit has weighed heavily on South Africa’s rand, and current global financial turbulence has placed the inflows that are needed to fund it at risk. – Reuters