South Africa's Central Bank Warns of Capital Flight Risk

Yawning deficits and labor turmoil have made South Africa's economy vulnerable to capital flight as investors pull back from risky markets, the country's central bank said Thursday. "The current-account deficit could pose a marked risk to the stability of the domestic financial system," the South African Reserve Bank said in its semiannual review of the country's financial stability, The Wall Street Journal reported. South Africa's current-account deficit narrowed to 5.1% in the fourth quarter of 2013 from 6.4% in the previous three months, but the bank warned Thursday that recent developments suggest it may widen again. Some 70,000 platinum miners have been on strike for three months, crippling output of a key South African export. The unemployment rate is stuck at about a quarter of the workforce, and economic growth forecast to reach 2.8% this year is too low to create many new jobs, the bank said. Meanwhile investors have been less forthcoming with the capital South Africa needs to finance the gap between its exports and imports. Foreigners sold South African stocks and bonds worth twice as much as the assets they bought in all of 2013, the bank said. Read more. (Subscription required.)