South Africa recorded a current-account deficit of 7,5% of GDP in the fourth quarter of 2007 from 8,1% previously, the South African Reserve Bank (SARB) said on Wednesday.
Speaking at the launch of the SARB’s quarterly bulletin, governor Tito Mboweni said that the deficit on the current account was more than fully financed through inflows of financial capital, and the SARB continued to build up international reserves during the fourth quarter.
”Partly as a result of increased global financial market risk aversion, the quantitatively most important form in which capital was attracted changed from portfolio investment to other investment, as SA banks repatriated part of their substantial foreign-currency deposit holdings abroad, possibly encouraged by the prevailing interest rate differential in favour of SA and risks and uncertainties attached to the global financial markets,” Mboweni said.
Further scope for attracting foreign savings was considerable, Mboweni said.
SA’s foreign debt was low, its private banking sector owned more than R225-billion in foreign exchange at the end of 2007, and interest-rate differentials, both nominal and real, continued to favour the country.
”In addition, the sound economic growth prospects, extensive infrastructure programme and responsible fiscal policies are likely to sustain confidence and investor interest,” he said.
These factors contributed to ample liquidity in the domestic market for foreign currency, making it possible for the SARB to accumulate more foreign reserves.
The bank’s gross international reserves rose from $33-billion at the end of December 2007 to $34,2-billion at the end of February 2008. – Sapa