NZ current account gap widens less than expected, seen growing in 2011
Dec. 22 (BusinessDesk) – New Zealand’s current account deficit widened less than expected in the third quarter, though the gap is set to widen in 2011 as economic recovery spurs imports and profits for foreign-owned companies.
The deficit was $1.77 billion in the three months ended Sept. 30, from a gap of $987 million in the second quarter, according to Statistics New Zealand. The annual current account gap widened to $5.93 billion from $5.6 billion.
Economists had expected the quarterly deficit to grow to $2.3 billion and the milder deterioration may buy the nation some breathing space after Standard & Poor’s cut the outlook on the AA+ sovereign to ‘negative’, citing the external imbalances. The nation’s external position has improved because the weak domestic economy has kept a lid on imports and profits from foreign-owned firms, while commodity export prices have climbed.
“As the economy recovers, profitability improves and import demand lifts the current account will widen further,” said Jane Turner, economist at ASB, in a note.
The current account deficit amounted to 3.1% of
gross domestic product, up from 3% in the previous quarter
and compared to expectations of 3.4%.
Turner forecasts the deficit will reach 5.2% of GDP by 2012, still well below the recent peak in 2008 of 8.7% of GDP.
The New Zealand dollar barely budged after the report, trading at 74.27 U.S. cents from 74.33 cents immediately before the numbers were released.
The seasonally adjusted balance of payments position was a surplus of $35 million, a turnaround from the $1.9 billion deficit in the June quarter, largely reflecting the government statistician’s decision to recognise an estimated $1.7 billion of reinsurance inflows related to the Canterbury earthquake.
Economists say this could grow as the full extent of claims is known.
Excluding the reinsurance flows, the deficit would have widened to about 4% of GDP, ASB’s Turner says.
New Zealand's net international liabilities were little changed at $162.5 billion or 85.2% of GDP at Sept. 30, down from $163.1 billion, or 86.3% of GDP at June 30.