The dollar and the rand. Picture: REUTERS, SIPHIWE SIBEKO
The dollar and the rand. Picture: REUTERS, SIPHIWE SIBEKO

A drop in exports pushed SA’s current account deficit to its highest level in two years, adding to a raft of negative data that have contributed to the rand’s slide.

The deficit on the current account — the broadest measure of trade in goods and services — may spell further weakness for the rand, which has already lost about 10% in 2018, fuelling speculation the Reserve Bank will be unable to support a weakening economy by lowering interest rates.

Rand weakness pushes up costs of imported goods such as fuel, pushing inflation higher.

Exports were knocked by a stronger rand earlier in 2018, the Bank said on Thursday.

The trade balance swung to a deficit of R25bn from a surplus of R74bn in the fourth quarter.

The rand jumped to its strongest levels in more than three years after Cyril Ramaphosa became president in February. The gains have since been erased amid concern that a potential global trade war may dent SA’s export performance.

"The latest weakness in South African exports could intensify if the current increase in global trade protection leads to a slowdown in global trade," said Stanlib chief economist Kevin Lings. While this could be offset by recent rand weakness, it highlighted that SA remained vulnerable to changes in global economic activity.

The current account deficit widened to 4.8% of GDP in the first quarter of 2018, from 2.9% the previous three months.

The rand fell 1% to R13.79/$ on Thursday, before trading 0.6% stronger by 7pm.

Currencies of nations with wide current account deficits tend to be vulnerable in times of global turmoil as investors bet they will struggle to attract the investment flows needed to plug the gap. SA’s current account shortfall has narrowed in recent years. It averaged more than 5% of GDP between 2012 and 2015.