South Africa trade deficit ‘may grow due to Europe's slowdown'
Growth will slow to about 3% this year from 3.1% last year
Johannesburg: South Africa's trade deficit will probably widen because of the economic slowdown in Europe, according to Kristin Lindow, sovereign credit analyst for Moody's Investors Service.
South African exports may be constrained for "as long as growth in Europe runs below potential," Lindow said. "The external sector in net terms will be a drag on the economy. It will be up to domestic demand to spur growth." South Africa posted a trade deficit in nine of the 12 months through March as the slowdown in Europe, which buys about a third of the country's manufactured goods, curbed exports.
A wider trade gap may increase the shortfall on the current account that rose to 3.6 per cent of gross domestic product in the fourth quarter. Economic growth will slow to about 3 per cent this year from 3.1 per cent last year, Finance Minister Pravin Gordhan said in a May 11 interview.
Moody's cut its outlook on South Africa's credit rating to negative in November citing concerns about "heightened political risk" and the pressure government spending puts on public finances. South Africa's fiscal deficit unexpectedly narrowed to 4.5 per cent in the 12 months through March and will fall to about 3 per cent in 2014, according to the National treasury.
