Data Flash - Balance of Payments - Q2 2000
Data Flash (New Zealand) Balance of Payments - Q2 2000
Key Points
The current account deficit for Q2 2000 was $1,392m, compared with a deficit of $1,181m in Q2 1999. The aggregate
outcome was consistent with DB and median market expectations. At the component level, the trade balance was marginally
better than we had expected but the services and investment income balances were marginally worse. The deficit for the
year to Q2 2000 was $7.5bn - equivalent to 7.1% of GDP - compared with $4.2bn a year earlier. There were no further
revisions to previously released data following the substantial revisions published earlier this week. The seasonally
adjusted Q2 current account balance, at $1,589m, was the lowest recorded since Q2 1999. When annualised, the latest
result equates to a deficit of 6.0% of GDP, reinforcing the conclusion that the annual current account deficit is likely
to improve over coming quarters. On an annual basis, the current account deficit has deteriorated by around $3.3bn,
reflecting: a $1.2bn decline in the trade surplus, in part reflecting the import of a naval frigate in Q4 1999 and sharp
increases in the cost of oil; and a $2.6bn worsening in the international investment position, reflecting both a fall in
credits and a sharp rise in debits. Partially offsetting these negatives, the balance on services has improved by around
$0.5bn over the past year reflecting strong growth in tourist arrivals. Market Reaction: There was no market reaction to
the current account data.
Comment
Today's release confirms our view that the deterioration in the current account deficit has halted. The annual deficit
is likely to print broadly unchanged at around 7.0% of GDP in Q3, although we anticipate a further fall in the
seasonally adjusted balance. The current account deficit should fall to around 6% of GDP in Q4 as the impact of the
import of a $0.6bn naval frigate in Q4 1999 drops out of the calculation. Thereafter, over the course of 2001, we expect
the current account deficit to fall towards 4% of GDP. This reflects our expectation of a significant improvement in the
trade balance as a result of strong growth in net export volumes and an improvement in the terms of trade as oil prices
recede from current highs.
Darren Gibbs, Senior Economist, New Zealand,
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