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S. Africa sees contraction of capital inflows: central bank

Xinhua, June 14, 2016 Adjust font size:

Capital inflows into South Africa shrank from 53.5 billion rand (about 3.5 billion U.S. dollars) in the fourth quarter of 2015 to 27.6 billion rand in the first quarter of 2016, the country's central bank said on Tuesday.

This coupled with the contraction of 1.2 percent in the country's GDP in the first quarter of 2016, according to data released by the South African Reserve Bank (SARB).

Releasing the data in Pretoria, SARB Head of Economic Reviews and Statistics, Johan van den Heever said this was the first disappointing outcome since 2009 during the global financial crisis.

The weak economic growth was as a result of the weak global demand for commodities, falling commodity prices and poor performance on the agricultural sector because of the drought, Van de Heever said.

In the first quarter of this year, production of iron ore and platinum declined and the mining sector's output declined significantly, the data showed.

Van den Heever said, "The commodity prices, of course, were not juicy, although they were propped up a bit in rand terms with the exchange rate being relatively weak. One of the explanations for this rather sharp decline is that previously people were still buying, pre-empting that prices would go up quite a bit."

South Africa's trade deficit narrowed to R38 billion rand (2.47 billion dollars) in the first quarter of 2016 from 41 billion rand (about 2.67 billion dollars) in the fourth quarter of 2015.

This was caused by the risks associated with political uncertainty in the country, low economic growth, low consumer and business confidence, the SARB said.

The central bank also said the country's current account shortfall in the first quarter of 2016 increased to five percent of gross domestic product (211 billion rand) from 4.6 percent (191 billion rand) in the fourth quarter of 2015.

This was necessitated by the country paying more on dividends for the investors based out of the country than receiving from the investments abroad.

"In volume terms both exports and imports contracted but rose in

ominal value terms. A recovery in the international prices of a

umber of South African export commodities and a more depreciated

exchange rate of the rand contributed to an increase in the value of merchandise exports in the first quarter of 2016. With a slightly firmer increase in exports than in imports, the country's trade deficit narrowed somewhat over the period," Van den Heever said.

In the period under review, the unemployment rate increased to 26.7 percent, from 26.4 percent a year earlier.

The bank said the actual national government revenue and expenditure for the full 2015/16 fiscal year were close to the budgeted amounts.

The SARB indicated that while corporate income tax collections were subdued, revenue collections in all the other tax categories were firm. (One U.S. dollar equals about 15.3 South African rand) Endit