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Deutsche Bank – Current Account Preview

Deutsche Bank Economic Note (New Zealand) NZ:

Current Account Preview - June Quarter 1999

Key Points

Release date:::::::::::::::::::::23 September, 10.45am (NZT)

DB forecast:::::::::::::::::::::Current account (ex migrant transfers) :::::::::::::::::::::::::::::::: ($NZ): -$2.1bn qtr.; -$6.7bn ann.

Forecast risk::::::::::::::::: Balanced risk assessment

Market expectations (median): Quarterly current account balance ($NZ): ::::::::::::::::::::::::-$2.0bn qtr.; Range: -$1.5bn$2.2bn
::::::::::::::::::::::::::::::::::Annual current account balance ($NZ): :::::::::::::::::::::::::-$6.6bn ann.; Range: -$6.1bn/-$6.7bn
Previous release (Mar qtr): Quarterly current account balance ::::::::::::::::::::::::::::::($NZ): -$0.9bn qtr. :::::::::::::::::::::::::::::::: Annual current account balance ($NZ): :::::::::::::::::::::::::::::-$6.5bn ann.

:::: Current Account (yr ended):::: Jun98::::Sep98::::Dec98::::Mar99 Jun99

Merchandise Exports ::::::::21,706 22,167::::22,566 22,616 22,770

Merchandise Imports ::::::::20,165 20,533::::21,009 21,363 21,881

Trade Balance ::::::::::::::::1,541::::1,634:::: 1,557 1,253:::: 889

Services Exports ::::::::6,666::::6,835:::: 7,035 7,540::::7,682

Services Imports ::::::::8,083::::8,410:::: 8,566 8,791::::8,867

Services Balance :::: -1,418 -1,575:::: -1,543 -1,252 -1,186

Total Investment Credits 404:::: 19::::::::-27::::-193:::: -50

Total Investment Debits:::::::: 7,495::::7,159:::: 6,728 6,742 7,000

Investment Income Balance:::: -7,091 -7,140:::: -6,755 -6,935 -7,050

Transfer Balance:::::::::::::::: 704:::: 642::::::::768:::: 557:::: 654

Current Account Balance::::::::-6,264 -6,439:::: -5,973 -6,377 -6,693

Balance (ex migrant transfers) -6,424 -6,574:::: -6,120 -6,482 -6,749 % of nominal GDP:::::::::::: -6.5:::: -6.5:::: -6.1::::-6.5:::: -6.7


We expect the newly formatted balance of payments data - under the new IMF methodology these data exclude the effect of migrant transfers - to show the annual deficit as a percentage of GDP widening from 6.5% to 6.7% of GDP over the June quarter. While we project some improvement in the annual services balances, this is expected to be more than offset by a deterioration in the annual investment balance and merchandise trade position.

Looking ahead, despite the outlook for exports and the terms of trade remaining positive, the on-going strength of import growth is likely to constrain the medium-term improvement in the trade balance. In addition, most of this improvement is expected to be offset by a worsening investment income deficit, reflecting a recovery in company earnings, rising world interest rates, as well as the funding costs related to continued high deficits.

With the deficit expected to widen to around 7.5% of GDP - largely due to the importation of a naval frigate - we expect the subsequent reduction in the deficit to stall above 6% of GDP. As such, we expect the external imbalance will remain NZ's key structural problem.

This, along with an extensive range of other publications, is available on our web site

In order to read our research you will require the Adobe Acrobat Reader which can be obtained from their website for free.

For answers to your EMU questions, check Deutsche Bank's EMU web site or email our helpline


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