NZ credit rating outlook lowered by S&P
The revision reflects New Zealand’s “narrowing economic policy flexibility in light of the country's widening external imbalances, as evidenced by the sizeable current account deficit,” S&P credit analyst Kyran Curry said in a statement. The New Zealand dollar tumbled to a four-week low after the statement.
The nation’s current account deficit widened to $15.5 billion, or 8.6% of gross domestic product in the year ended September 30. The prolonged recession is eroding the government’s tax revenue at a time it wants to accelerate spending on major infrastructure projects and Finance Minister Bill English last month predicted budget deficits will remain until 2013.
The deficit will balloon to $10.9 billion by 2011, amounting to 5.6% of GDP, according to Treasury forecasts.
The kiwi dollar dropped to 56.45 US cents from 57.20 before the statement.
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