South Africa's current account deficit widened to 4.8% of GDP, worse than expected and a lot worse than the previous quarter's -2.9% of GDP, the Reserve Bank announced on Thursday.
The deficit is the highest since the 4.9% seen in the first quarter of 2016.
"South Africa's Q1 Current Account Deficit prints at -4.8% of GDP, which is worse than the expected -3.9%. The rand reacted negatively to the news, and it is currently trading at R13.7400 to the US dollar," TreasuryONE said in a snap note.
"South Africa’s trade balance switched from a surplus of R74bn in the fourth quarter of 2017 to a deficit of R25bn in the first quarter of 2018," the bank said in its quarterly bulletin.
Following seven consecutive quarterly surpluses, South Africa’s trade balance with the rest of the world switched to a deficit in the first quarter of 2018 as the value of net gold and merchandise exports decreased much more than that of merchandise imports.
The value of mining exports in particular receded notably, weighed down by a sharp decline in the rand price of mining commodities, which contributed to a significant deterioration in South Africa’s terms of trade.
The bank further said the drop in mineral exports was due to iron ore and coal which were affected by the derailment of a train transporting iron ore to the Saldanha harbour.
Despite a slight narrowing of the shortfall on the services, income and current transfer account, the worsening of the trade balance resulted in a marked deterioration of the deficit on the current account of the balance of payments, to 4.8% of GDP in the first quarter of 2018.
Core inflation slowed to a six-year low of 4.1% in March, while the consumer price inflation also ticked upwards in April, following the VAT increase and higher fuel prices.
According to the report, real economic activity in the country contracted sharply in the first quarter of 2018, despite improvements in business and consumer confidence.
Growth in public sector remuneration moderated from a year-on-year rate of 13.6% in the third quarter of 2017 but remained high at 10.6% in the fourth quarter.
"Despite the moderation in public sector wage growth, year-on-year increases in nominal remuneration per worker remained above the upper limit of the inflation target range for all tiers of the public sector," said the report.
The public sector remuneration growth per worker had accelerated on an annual average basis from 7.0% in 2016 to 11.3% in 2017, while the private sector annual average pay had slowed for five successive years from 7.4% in 2012 to 4.9% in 2017.
Job losses in a slow economic environment had contributed to the downward trend on pay increases.
The country’s total external debt as a ratio of annual GDP increased from 47.8% at the end of September 2017 to 49.6 % at the end of December, the highest since 2002.
The bank said the "significant increase" was driven by non-residents’ increased holdings of domestically issued rand-denominated debt of national government and the government became a significant contributor to total external debt, as a result.* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER