WELLINGTON, Dec 22 (Reuters) - New Zealand's annual current
account deficit widened in the third quarter on higher priced oil
imports.
The annual deficit stood at NZ$15.5 billion ($8.9 billion) in the September quarter compared with a NZ$14.9 billion deficit in the previous quarter, data showed on Monday.
Analysts in a Reuters poll had forecast an annual deficit of NZ$15.5 billion.
The data is not expected to affect the central bank's interest rate outlook.
***************************************************************
KEY POINTS:
- Q3 seasonally adjusted deficit NZ$4.08 billion from NZ$4.6 billion in Q2 as foreign investors earned less from their New Zealand investments.
- Actual, unadjusted Q3 deficit NZ$5.99 billion vs forecast deficit of NZ$6 billion.
- Deficit put at 8.6 percent of GDP, compared with 8.4 percent in Q2.
(Click on for current account table)
COMMENTARY:
SU-LIN ONG, SENIOR ECONOMIST, RBC CAPITAL MARKETS
'The deficit was much as expected, but that doesn't make it any less ugly. Exports were under pressure from falling commodity and dairy prices, while import values were lifted in part by the weaker Kiwi dollar.
'The deficit is heading in the wrong direction and our concern is what this might mean for New Zealand's credit rating. Crucially, the budget outlook has deteriorated and the ratings agencies have counted on strong government savings to compensate for the country's structural current account imbalance.
'Ultimately, we doubt New Zealand will be downgraded, but it's a risk investors should be aware of.'
JOSHUA WILLIAMSOM, SENIOR STRATEGIST, TD SECURITIES 'It is in line with expectations, but it is still much larger than the second quarter. This shows that the external imbalances are widening. This is becoming more of a concern, more so because we are expecting a severe and prolonged recession in New Zealand.
'It doesn't mean a lot for the kiwi because it was in line with expectations, and we are not expecting a lot of trade this week ahead of the holidays.
'But the deficit should narrow next year with fewer imports as the economy slows.'
MARKET REACTION:
The New Zealand dollar was unchanged after the data at $0.5743/53, while the March bank bill contract was flat with the yield at 4.41 percent compared with the 5 percent cash rate.
LINKS:
- The full data is available at the Statistics New Zealand Web site: www.govt.nz
- For all New Zealand news and data, 3000 Xtra users can click on
BACKGROUND:
- Ratings agency Standard and Poor's has previously said New Zealand's current account deficit was a key risk to the country's sovereign rating, but has been offset by the government's strong fiscal position.
- New Zealand's yawning trade deficit had been a key reason for the deterioration in the current account balance, although a strong rise in dairy and oil exports helped to reduce the annual shortfall after it hit record high levels in Q1 2006, hitting 9.3 percent of gross domestic product.
- The Reserve Bank of NZ in its Dec. 4 monetary policy statement forecast the current account deficit to fall to 7.9 percent in 2009 and gradually declining over the next two years to 6.1 percent in 2011.
- Last week the Treasury Department forecast the current account deficit to peak at 9.4 percent of gross domestic product in the year to March 2009 before gradually reducing.
($1=NZ$1.74) Keywords: NEWZEALAND ECONOMY/CURRENTACCOUNT (Wellington newsroom tel +64 4 471-4234, fax +64 4 473-6212, wellington.newsroom@reuters.com) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The annual deficit stood at NZ$15.5 billion ($8.9 billion) in the September quarter compared with a NZ$14.9 billion deficit in the previous quarter, data showed on Monday.
Analysts in a Reuters poll had forecast an annual deficit of NZ$15.5 billion.
The data is not expected to affect the central bank's interest rate outlook.
***************************************************************
KEY POINTS:
- Q3 seasonally adjusted deficit NZ$4.08 billion from NZ$4.6 billion in Q2 as foreign investors earned less from their New Zealand investments.
- Actual, unadjusted Q3 deficit NZ$5.99 billion vs forecast deficit of NZ$6 billion.
- Deficit put at 8.6 percent of GDP, compared with 8.4 percent in Q2.
(Click on for current account table)
COMMENTARY:
SU-LIN ONG, SENIOR ECONOMIST, RBC CAPITAL MARKETS
'The deficit was much as expected, but that doesn't make it any less ugly. Exports were under pressure from falling commodity and dairy prices, while import values were lifted in part by the weaker Kiwi dollar.
'The deficit is heading in the wrong direction and our concern is what this might mean for New Zealand's credit rating. Crucially, the budget outlook has deteriorated and the ratings agencies have counted on strong government savings to compensate for the country's structural current account imbalance.
'Ultimately, we doubt New Zealand will be downgraded, but it's a risk investors should be aware of.'
JOSHUA WILLIAMSOM, SENIOR STRATEGIST, TD SECURITIES 'It is in line with expectations, but it is still much larger than the second quarter. This shows that the external imbalances are widening. This is becoming more of a concern, more so because we are expecting a severe and prolonged recession in New Zealand.
'It doesn't mean a lot for the kiwi because it was in line with expectations, and we are not expecting a lot of trade this week ahead of the holidays.
'But the deficit should narrow next year with fewer imports as the economy slows.'
MARKET REACTION:
The New Zealand dollar was unchanged after the data at $0.5743/53, while the March bank bill contract was flat with the yield at 4.41 percent compared with the 5 percent cash rate.
LINKS:
- The full data is available at the Statistics New Zealand Web site: www.govt.nz
- For all New Zealand news and data, 3000 Xtra users can click on
BACKGROUND:
- Ratings agency Standard and Poor's has previously said New Zealand's current account deficit was a key risk to the country's sovereign rating, but has been offset by the government's strong fiscal position.
- New Zealand's yawning trade deficit had been a key reason for the deterioration in the current account balance, although a strong rise in dairy and oil exports helped to reduce the annual shortfall after it hit record high levels in Q1 2006, hitting 9.3 percent of gross domestic product.
- The Reserve Bank of NZ in its Dec. 4 monetary policy statement forecast the current account deficit to fall to 7.9 percent in 2009 and gradually declining over the next two years to 6.1 percent in 2011.
- Last week the Treasury Department forecast the current account deficit to peak at 9.4 percent of gross domestic product in the year to March 2009 before gradually reducing.
($1=NZ$1.74) Keywords: NEWZEALAND ECONOMY/CURRENTACCOUNT (Wellington newsroom tel +64 4 471-4234, fax +64 4 473-6212, wellington.newsroom@reuters.com) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.