Standard&Poor's said that its views on New Zealand's sovereign creditworthiness was not immediately affected by today's budget.Standard&Poor's has New Zealand on an AA plus long-term rating.New Zealand had sound public finances, a sound financial
Standard&Poor's said that its views on New Zealand's sovereign creditworthiness was not immediately affected by today's budget.
Standard&Poor's has New Zealand on an AA plus long-term rating.
New Zealand had sound public finances, a sound financial sector, resilient economy, and open and transparent policy environment, the credit rating company said.
These strengths offset the country's high level of private sector external indebtedness at a time of continuing elevated stresses in the global financial system.
The Government is forecasting a fiscal deficit on a cash basis of 6.5 percent of gross domestic product in the year ending June 30, 2011. The budget provides for lower deficits of 4.5 percent in 2012 and 3.3 percent in 2013 and an eventual return to surplus in 2016.
"Although the deficit in 2011 is large, we note that the outlook has improved since the last budget and there remains an achievable and believable path to return the operating position to surplus," Standard&Poor's credit analyst Kyran Curry said.
But New Zealand's current account deficits and high external debt made the economy vulnerable to a change in international investor sentiment or adverse exchange-rate movements.
"The country's external financing needs are among the highest of any rated sovereign. In addition, the current account deficit is expected to return to 7 percent of gross domestic product annually within the next few years as economic growth recovers. This implies continuing growth in the stock of New Zealand's net external debt."
He added that New Zealand had a strong history of prudent and flexible monetary and exchange rate management."
