INDEPENDENT NEWS

Deutsche Bank: NZ Current Account - Sept Q

Published: Tue 21 Dec 1999 01:55 PM
Data Flash (New Zealand)
NZ Current Account - September Quarter 1999
Key Points
The current account deficit for the year to September 1999 increased to $6.6bn (estimated at 6.5% of GDP), from the revised deficit of $6.2bn in the June 1999 quarter (6.2% of GDP).
This compared with average market expectations for an annual deficit of $6.8bn - with the forecast error due to a better-than-expected September quarter. There were only minor revisions to historical data.
On an annual basis, the deterioration in the deficit largely reflected:
a sharp decline in the trade surplus, with a strong increase in the imports more than offsetting a comparatively modest improvement in the export performance;
a worsening in the international investment position, primarily due to a rise in debits from increased earnings from NZ-located enterprises that are foreign owned;
Partially offsetting these negatives, the services balance improved reflecting an increase in overseas visitor numbers and a modest rise in transfers on the back of a rise in non-resident withholding tax received from overseas.
Market Reaction: The NZD strengthened immediately following the release to around 0.5100.
Current Account (year ended)
:::::::::::::::::::::::::::: Dec98::::Mar99:::: Jun99:::: Sep99
Merchandise Exports::::22,408::::22,468::::22,663::::22,912
Merchandise Imports::::20,992::::21,344::::21,983::::22,824
Trade Balance:::::::: 1,730::::1,465:::: 1,054:::: 472
Services Exports:::: 6,954::::7,437:::: 7,609:::: 7,735
Services Imports:::: 8,475::::8,657:::: 8,562:::: 8,538
Services Balance:::: -1,521::::-1,220:::: -953:::: -803
Total Investment Credits 812:::: 314:::: 29:::: 208
Total Investment Debits 6,621::::6,707:::: 6,915:::: 7,153
Investment Income Bal -5,809::::-6,393::::-6,886::::-6,945
Current Account Bal::::-4,978::::-5,696::::-6,216::::-6,610
% of nominal GDP:::: -5.0:::: -5.8:::: -6.2:::: -6.5
Source: DB Global Markets Research, Statistics NZ
Comment
With the annual deficit and its components broadly in line with expectations, there was little new information in today's release. However, the somewhat smaller-than-expected deficit provides a marginally better starting position for the deterioration that is forecast over coming quarters. Due to the combination of a continued strength in domestic demand, high oil prices, the importation of aircraft and a naval frigate, as well as a relatively slow export recovery, we expect the current account deficit to rise above 7.5% in the December quarter. Thereafter, the balance of payments is expected to show only a gradual improvement, with the deficit projected to remain above the 6% level over the next two years.
While we expect the trade balance to improve on the back of a stronger export performance and more favourable terms of trade, a deterioration in the investment income balance is expected to provide a partial offset. The investment debits will rise faster than nominal GDP, due to rising world interest rates and a recovery in the profitability of foreign-owned corporates in New Zealand.
The stubbornly high deficit outlook is expected to lead to a S rating downgrade in early 2000 (most likely following the release of the February Budget Policy Statement) and continued pressure on the medium-term performance of the NZD.
The markets' attention is now focused on the release of September quarter GDP data (Thursday, 23 December). While our central forecast is for an increase of +2.3% qoq, we attach a significant probability to an upward revision of the June quarter GDP figure and a correspondingly lower September quarter rise - with the exact quarterly pattern irrelevant for the level of the output gap at the end of the period. An overall June/September increase of 2.0% is consistent with our estimate of the underlying performance of the economy over that period.
ENDS
This, along with an extensive range of other publications, is available on our web site http://research.gm.db.com
In order to read our research you will require the Adobe Acrobat Reader which can be obtained from their website http://www.adobe.com for free.
For answers to your EMU questions, check Deutsche Bank's EMU web site http://www.db.com/emu or email our helpline business.emu@db.com.

Next in Business, Science, and Tech

Govt raids PGT for $40M top-up to rural broadband roll-out
By: BusinessDesk
Auckland-Chicago named a top 10 ‘most exciting’ new route
By: Air New Zealand
ESR ups its reporting on Meningococcal disease
By: ESR
Game-changing technology for 3D printing tiny structures
By: KiwiNet
PGF to improve regional digital connectivity
By: New Zealand Government
PGF investment in Manawatū-Whanganui
By: New Zealand Government
PGF investment in Advanced Aviation Hub in Whanganui
By: New Zealand Government
PGF investing to expand National Driver Training Centre
By: New Zealand Government
PGF investment to fast track regional freight hub
By: New Zealand Government
$48 million Provincial Growth Fund announcements welcomed
By: Horizons Regional Council
High unemployment drives teen to transform his district
By: Horowhenua District Council
Manawatu-Whanganui PGF spending is just picking winners
By: New Zealand Taxpayers' Union
Meningococcal W – Expert Reaction
By: Science Media Centre
Increased vigilance needed for meningococcal disease
By: Ministry of Health
View as: DESKTOP | MOBILEWe're in BETA! Send Feedback © Scoop Media